url
stringlengths 59
59
| text
stringlengths 0
1.13M
| downloaded_timestamp
stringclasses 1
value | created_timestamp
stringlengths 10
10
|
|---|---|---|---|
https://www.courtlistener.com/api/rest/v3/opinions/7218869/ | GALSTON, District Judge.
This is a motion to dismiss the bill of complaint on the ground that the patentee unreasonably neglected to enter a disclaimer to claims 6, 8, 11, and 13, which were held invalid by the United States Court of Appeals for the Sixth Circuit on June 28, 1930, in the action of F. W. Woolworth Co. v. Emery (S. S. Kresge v. Emery), 42 F.(2d) 398.
The motion is opposed on the ground that on or about November 14, 1929, and therefore prior to the adjudication of the eases in the Sixth Circuit, a suit was started by the plaintiff on the same patent in the Southern District of New York entitled Emery v. Vito Radice et al.; and that, while said action was still pending in the Southern District and before the trial thereof, the present action was started in this court.
It appears, moreover, that in December, 1931, the action in the Southern District was dismissed for want of prosecution because the plaintiff was at that time in California and without means.
In Ensten v. Simon, Ascher & Co., 282 U. S. 445, 51 S. Ct. 207, 75 L. Ed. 453, the law. is laid down that, to protect the valid part of a patent containing an invalid claim, the patentee must disclaim the invalid part without unreasonable neglect or delay. Revised Statutes, §§ 4917, 4922 (U. S. C., title 35, §§ 65, 71, 35 USCA §§ 65, 71).
Erom the moving papers it appears that no writ of certiorari was sought from the Su-° preme Court to review the Circuit Court of Appeals in the Sixth Circuit. Of course, the effect of a disclaimer would be to limit the plaintiff in all other circuits. Thus the patentee is put in a most embarrassing position. Ordinarily, if the patent is held invalid in one circuit, there is the possibility that a contrary view may be held in .another circuit, and the matter of validity then brought before the United States Supreme Court. The harshness of the result which forecloses a patentee from thus contesting in the various circuits was, however, considered by our own Circuit Court of Appeals in R. Hoe & Co., Inc., et al. v. Goss Printing Press Co., 31 F.(2d) 565, 566. The court said: “While we acknowledge the difficulty and the possibility, it appears to us that so to extend the patentee’s time might result in avoiding the statute altogether.”
In view of these two decisions, there remains only a question of fact to decide on this motion. Because at the time of the rendering of the decision in the Sixth Circuit the plaintiff had a cause pending in the Southern District, does he present a reasonable ground for his neglect to file a disclaimer? There might be some force in this contention were it not for the fact that, as appears from Mr. Randolph’s affidavit, the *168cause in the Southern District was dismissed in December, 1931. Since then the plaintiff had ample time and without embarrassment, other than that caused by the statutory requirement, to file his disclaimer.
The motion is granted.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218870/ | GODDARD, District Judge.
I think this court should not decline to take jurisdiction of this suit in admiralty. The majority of the libelants are American corporations. The insurance policies were issued here. The merchandise was shipped and the bills of lading were also issued in this country. They contain the “Jason” clause which is based upon section 3 of the Harter Act (46 USCA § 192), and the principal question of law involved is a construction of the Hartef Act. The real issue of fact in the case is the seaworthiness of the Maria at the time she sailed from the American Gulf ports. All the witnesses for the libelants are in this country, and presumably (as the stranding occurred in the port of Wilmington, N. C.) many of the witnesses which the claimant-respondent would be likely to call are in this country, with the exception of the officers and crew of the Maria which is regularly engaged in trading between Italian and American ports. In Charter Shipping Co., Ltd., v. Bowling, Jones & Tidy, 281 U. S. 515, 50 S. Ct. 400, 401, 74 L. Ed. 1008, the Supreme Court merely held that the District Court could not be said to have “improvidently exercised its discretion” in declining to take jurisdiction, and'in the Charter Shipping Co., Ltd., Case both the libelant and the respondent were British subjects, and, so far as the records show, no American citizen had even an indirect interest in the litigation. Moreover, in that case the respondent had no place of business in this country, and the ship in question was not here, and the jurisdiction in the suit in personam had been obtained by foreign attachment. Further, Mr. Justice Stone states that “the bills of lading are not in the record and it does not appear that they embraced Jason or other clauses modifying the liability in general average.”
The facts in the case at bar are clearly distinguishable from the case of Tricolor (D. C.) 1 F. Supp. 934, 1923 A. M. C. 1256.
The above is consistent with Fairgrieve v. Marine Insurance Company (C. C. A.) 94 F. 686; Chubb v. Hamburg-American Steam Packet Co. (D. C.) 39 F. 431.
Motion denied. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218871/ | FRANKLIN E. KENNAMER, District Judge.
The First National Bank & Trust Company of Tulsa, a national banking association of Tulsa, Okl., instituted this action against York Petroleum Company, a corporation organized under the laws of the state of Delaware, and J. I. Cromwell, Mabel Y. Cromwell, and J. W. Cromwell, all residents of the state of Oklahoma, in the district court of Tulsa county, Okl. The petition sets forth a cause of action against the nonresident corporate defendant, York Petroleum Company, upon a promissory note, and seeks to recover against the York Petroleum Company the sum of $124,943.26, together with interest, and an attorney’s fee of $12,509. The petition further alleges that, in addition to the indebtedness represented by the promissory note sued on, York Petroleum Company has executed written guaranties of debts due to the plaintiff from other creditors, and that it has incurred other debts and obligations in large sums, but the exact amount and character of the obligations are unknown to the plaintiff; that the three individual defendants were the owners of all of the outstanding capital stock of the York Petroleum Company ; that, for the purpose of receiving credit from plaintiff, the nonresident corporate defendant had furnished written financial statements, listing, among other assets, 5,000 shares of stock of Shoreham Investment Company; that within the last two or three months, through conspiracy of its stockholders, the said stock has been .wrongfully diverted as an asset of the defendant corporation, and has been transferred without consideration to the defendant Mabel Y. Cromwell; that the individual defendants have treated the business affairs of the corporate defendant as if they were the individual owners of the assets of the corporation, and have withdrawn the assets and pledged them for their individual needs; that the corporate defendant is insolvent, and that plaintiff is without recourse except through the intervention of a court of equity. Plaintiff then asks for judgment for the sum due on the note against the corporate defendant; that a receiver be appointed to take charge of the affairs of the corporation, to collect and dispose of the assets, and to distribute the proceeds to its creditors, and that the defendant Mabel Y. Cromwell be enjoined from disposing of or hypothecating the stock of Shoreham Investment Company, and that the individual defendants be enjoined from diverting any of the assets of the corporation. The defendant York Petroleum Company removed the case to this court, and the plaintiff’s motion to remand the cause to the state court brings it on for consideration. The theory upon which the nonresident defendant removed the cause *170is that a separable controversy exists between, it and the resident plaintiff. It is contended by plaintiff, in support of its motion to remand, that no separable controversy exists because all of the defendants are necessary parties to the aetion; that the relief prayed for is incidentally a judgment on the plaintiff’s note, and the main relief asked is that a receiver be appointed for the properties of the nonresident corporate defendant for the benefit of its creditors and stockholders, and particularly for the purpose of collecting assets wrongfully diverted. It is further urged that the petition, taken as a whole, demands relief from the corporation and the individual defendants jointly, and plaintiff argues that the real controversy between the plaintiff and all the defendants is the wrongful and illegal disposition of the assets of the corporation for the benefit of the individual defendants, who are its directors and stockholders.
It is well settled that plaintiff’s petition alone must be considered in the determination of the existence of a separable controversy warranting a removal of a case from the state to a federal court. Wilson v. Oswego Township, 151 U. S. 67, 14 S. Ct. 259, 38 L. Ed. 75. There can be no doubt but that plaintiff’s petition clearly sets forth a cause of aetion against the nonresident corporate defendant upon a promissory note; this is a controversy existing between a resident plaintiff and a nonresident defendant, in which the individual resident defendants have no concern. The other portions of plaintiff’s petition pleaded facts upon which they seek injunctive relief and the appointment of a receiver. There are several controversies involved in the suit, but, in my opinion, the main and principal controversy set forth in plaintiff’s petition is its attempt to recover upon the promissory note against the nonresident defendant.
It is difficult to define rules applicable to every ease for determining if a suit is made up of separable controversies, but the same principle controls in the determination of this fact in the various forms or kinds of actions or proceedings. The difficulty lies in applying the established principles to the particular form or kind of action or proceeding. The question in every case, no matter what its form, is as to whether it is entire, or severable into different controversies. If the aetion is drawn in the form.of an entire and single cause of action, no.- separable controversy is presented, where there are numerous defendants, as the action is a single action against all of the defendants. However, where the petition sets forth a form of an aetion against numerous defendants, which is divisible, then a separable controversy is presented. In this case, it most clearly appears that a controversy was pleaded, which exists between the resident plaintiff and the nonresident corporate defendant, upon the promissory note.
Plaintiff argues that the primary purpose of its petition is not only to prevent the individual defendants, as officers and directors of the nonresident defendant corporation, from wrongfully diverting the assets, but also seeks a means to recover the assets theretofore wrongfully and illegally disposed of, by means of a receiver. Such an argument is tantamount to saying that the real purpose of the aetion is the appointment of a receiver to recover dissipated assets, and that the recovery upon the promissory note is merely incidental thereto. It is well established that a receivership is not an independent remedy, but is purely ancillary to other relief sought. Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 43 S. Ct. 454, 67 L. Ed. 763; Superior Oil Corporation v. Matlock (C. C. A.) 47 F.(2d) 993; Martin v. Harnage, 26 Okl. 790, 110 P. 781, 38 L. R. A. (N. S.) 228; Wagoner Oil & Gas Company v. Marlow, 137 Okl. 116, 278 P. 294. There can be no doubt but that plaintiff’s petition is primarily based upon its right to recover upon the promissory note. It is impossible to consider the allegation in plaintiff’s petition, wherein it charges that, in addition to the indebtedness represented by the note, the corporate defendant has executed written guaranties of debts due to the plaintiff from other creditors, as stating a cause of action, and it therefore cannot be considered as a material part of plaintiff’s right to recover against the corporate defendant. However, if such allegations were sufficiently definite to constitute a cause of action, another separable controversy would be presented between the resident plaintiff and the nonresident defendant, as the individual defendants are not alleged to have any connection with such indebtedness.
Plaintiff has cited eases announcing the well-established rules controlling the removal of causes. These eases establish the proposition that, in order to justify a removal on the ground of a separable controversy, there must be a controversy which can be fully determined as between them, and that the whole subject-matter of the suit must be capable of being finally determined as between them and complete relief afforded as to the separate cause of action without the presence of others originally made parties to the suit. *171The relief sought must not be incidental to the main purpose of the bill in a separable controversy justifying a removal. See Torrence v. Shedd, 144 U. S. 527, 12 S. Ct. 726, 36 L. Ed. 528; Colburn v. Hill (C. C. A.) 101 F. 500; Baillie v. Backus (D. C.) 230 F. 711. The principles announced in these cases are sound. However, these are the principles which are decisive of the instant case: Plaintiff is a creditor, and has rights because of that fact. Its rights, as set forth in its petition, are to recover upon the promissory note. The right' to recover a judgment upon the note against the nonresident corporate defendant contemplates a determination of that controversy between the resident plaintiff and the nonresident defendant, and complete relief of a judgment for the recovery of the sum due may be afforded without the presence of the individual defendants. Plaintiff’s petition is so drawn as to clearly show that the principal relief sought is the recovery of money due it upon the promissory note, and upon written guaranties executed by the nonresident defendant. It seeks incidental r&lief of injunction and the appointment of a receiver in order to aid in the accomplishment of its primary purpose — the collection of the money due it by the nonresident corporate defendant. By reason of pleading the separable controversy, the cause is removable to this court by the nonresident defendant.
Plaintiff’s motion to remand should be overruled.
It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218872/ | JOHNSON, District Judge.
' In the above cases the facts are the same and were argued together. They will be disposed of in one opinion.
The defendants, John Munlevitch and Jack Wright, were arrested on January 15, 1931, for a violation of the National Prohibition Act (27 USCA) and after a hearing before a United States commissioner were held for court. Each defendant entered into a recognizance with Michael Gower as surety for appearance before the District Court of the United States for the Middle District of Pennsylvania on the first day of March term, 1931. The recognizance in the case of Jack Wright contained the following condition: “The condition of this recognizance is such, that if the said Jack Wright, principal shall personally appear before the District Court of the United States in and for the Middle District of Pa., on the first day of the March term, 1931, to be begun and held at the City of Scranton, Pa., at 2 o’clock P. M., on the 9th day of March, A. D. 19*31, and from day to day and from time to time thereafter, until finally discharged therefrom, then and there to answer the charge that * * * and then and there -abide the judgment of said court and not depart without leave thereof, then this recognizance to be void, otherwise to remain in full force and virtue.”
The recognizance in the Munlevitch ease contains the same condition.
Indictments were obtained against the defendants Jack Wright and John Munlevitch in February, 1931. For some reason these eases were not called for trial during the March term, 1931. The United States attorney contends that they were continued for several terms because of the inability of counsel for the defendants to be present. At the January term, 1932, the United States attorney called the eases for trial, and upon failure to answer to their names, the surety was called upon to produce them. There being no appearance of either the surety or the defend*172ants, the court entered an order forfeiting their recognizance on January 22, 1932. A praecipe for scire facias sur forfeited recognizance was filed against the defendants and the surety filed affidavits of defense. The United States attorney then took a rule for judgment against the defendants for want of sufficient affidavits of defense.
The affidavits of defense aver that the defendants in the criminal eases together with their surety appeared in court on the 1st day of the March term, 1931, and remained in attendance during that term, but that the government proceeded to try other cases and did not try their cases. The affidavits of defense further aver that the defendants together with their surety appeared at the June term, 1931, and remained in court during the entire term without having their eases called for trial.
The surety contends that he has complied with the terms of the obligation of the bond and is not liable for any«penalty or judgment thereon. If this contention is correct and the evidence should substantiate the averments) a remission of the forfeiture of the recognizance would follow. Any right to a remission of forfeiture in whole or in part must depend upon the provisions of 18 USCA § 601: “Remission of penalty of recognizance. When any recognizance in a criminal cause, taken for, or in, or returnable to, any court of the United States, is forfeited by a breach' of the condition thereof, such court may, in its discretion, remit the whole or a part of the penalty, whenever it appears to the court that there has been no willful default of the party, and that a trial can, notwithstanding, be had in'the cause, and that publie justice does not otherwise require the same penalty to be enforced.”
In the case of the United States of America v. Rutherford et al., 59 F.(2d) 1027, this court held that under this statute two conditions must affirmatively appear to give this court jurisdiction to remit forfeitures: First, that there has been no willful forfeiture by the party; and, secondly, that a trial can, notwithstanding, be had in the cause. From the pleadings it app fears that the defendants in the criminal proceedings have not been apprehended and the trial cannot be had. The second condition required by the statute has not been met and this court, therefore, cannot remit the forfeiture.
Counsel for the surety contends, however, that the surety has performed the conditions of the recognizance by producing the defendants at the March term, 1931, because the bonds were conditioned for the appearance of the defendants at the March term, 1931, only. As was said by Bourquin, District Judge, in construing the conditions of a similar form of bond in the case of the United States v. Payne et al. (D. C.) 1 F. Supp. 895, this position is untenable. A reading of the bonds in the present ease shows that they were conditioned for the appearance of the defendants before the court at its next term beginning the 9th day of March, 1931, and from day to day apd from time to time thereafter until finally discharged. Any practice in the state courts of Pennsylvania cannot change the plain language of the bonds in question and the act of Congress.
And now, July 28, 1933, the rules for judgment for want of a sufficient affidavit of defense are hereby made absolute. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218873/ | VAUGHT, District Judge.
The plaintiff in this action was appointed receiver by the district court of Tarrant county, Ninety-Sixth judicial district of Texas, and the order appointing him as receiver is as follows:
“The State of Texas v. Northwest Texas Building and Loan Association.
“No. 89166.
“In the District Court of Tarrant County, Ninety-Sixth Judicial District of Texas.
“On this 31st day of December, 1931, came on to be heard the petition of the plaintiff, State of Texas, to revoke the charter of the defendant, Northwest Texas Building & Loan Association. The Court having heard the pleadings and the evidence is of the opinion that the law is with the plaintiff, and that such charter should be revoked.
“It is therefore ordered, adjudged and decreed by the Court that the corporate charter of the defendant, Northwest Texas Building & Loan Association, issued by the State of Texas, on or about the 29th day of June, 1928, be, and the same is hereby revoked and forfeited, and the corporate existence of said Northwest Texas Building & Loan Association is hereby terminated.
“It is further ordered, adjudged and decreed by the Court that title to all properties of said defendant be and is hereby vested in J. L. Stuekert, Receiver, under appointment by this Court of date December 23d, 1930, and his successors as such receiver, for the purpose of liquidation and winding up of the affairs of said Building & Loan Association, and that such liquidation shall be continued under the supervision and administration of this Court,- and for such purpose only this ■case shall be kept open, pending tbe further ■orders of this Court.
“[Signed] H. S. Lattimore, Judge.”
The receiver brings this action ini this court alleging in substance that the defendant is a resident of the Western district of the state of Oklahoma, living in Oklahoma City; that the defendant, while the Northwest Texas Building & Loan Association was m an insolvent condition, withdrew $4,000' from said association in payment for stock of the par value of $4,000; that this was in violation of the laws of the state of Texas.
Defendant answers admitting that he drew $2,000, denies that he drew the sum of $4,000 from said association, but denies that he had any knowledge at any time that said building and loan association was in an insolvent condition, prior to the appointment of a receiver.
The defendant, at the time of the trial, questions the jiuisdietion of the court for the reason that the plaintiff is a mere chancery receiver and that his powers and duties are limited to the jurisdiction of the court which appointed him, and that he has no power to bring this action in this court, a foreign jurisdiction to the state of Texas.
The evidence discloses that the defendant is a resident of Oklahoma City, did buy $4,-000 worth of stock as a result of an advertisement in some newspaper, and that later, as his needs required, he withdrew $2,000 by surrendering $2,000 worth of stock; that he knew nothing of the affairs of the Northwest Texas Building & Loan Association of Fort Worth, Tex.; that he attended no meetings, had no knowledge that he was ever elected a director and had no knowledge of the internal affairs of the association, believing at all times that said association was a going concern and was entirely solvent.
There are two questions presented: First,' has this court jurisdiction; and, second, if so, is the plaintiff entitled to recover the amount sued for?
The court will consider first the question of jurisdiction. The Revised Civil Statutes of Texas 1025, provide as follows:
“Art. 2293. Receivers may be appointed by any judge of a court of competent jurisdiction of this State, in the following eases: * * *
“3. In eases where a corporation is insolvent or in imminent danger of insolvency; or has been dissolved or has forfeited its corporate rights.
“4. In all other cases where receivers have heretofore been appointed by the usages of the court of equity.
“Art. 2297. Receivers’ power. — The receiver shall have power, under the control of the court, to bring and defend actions in his own name as receiver, to take charge and keep possession of the property, to receive rents, collect, compound for, compromise demands, make transfers, and generally to do such acts *174respecting the property as the court may authorize.
“Art. 2319. In all matters relating to the appointment of receivers, and to their powers, duties and liabilities, and to the powers of the court in relation thereto, the rules of equity shall govern whenever the same are not inconsistent with any provision of this chapter and the general laws of the State.”
It is admitted by counsel that the receiver would have only such powers as are granted a receiver by the state statute. Do the sections of the statute above quoted vest the receiver with the title to the property involved in the receivership? This matter has been answered by the highest court of Texas, in Cocke v. Wright (Tex. Com. App.) 39 S.W.(2d) 590, 592:
“The partnership being insolvent, and no longer in existence, except for the purpose of winding up its affairs, it was the duty of the receiver, under the orders of the court, to collect from those who owed it, the full amounts of their respective debts, and after paying the expenses of the receivership proceedings to distribute the remainder among the partners.
“When the receiver was appointed and had qualified, this had the effect to put the property of the partnership in custodia legis. Texas Trunk Ry. Co. v. Lewis, 81 Tex. 8, 16 S.W. 647, 26 Am. St. Rep. 776. The receiver is a mere agent of the court wherein the receivership proceedings are pending. * * ”
In the ease of Durham v. Scrivener (Tex. Civ. App.) 259 S. W. 606, 611, the Texas court says: “A receiver has no title, but only temporary possession, and so long as it is not proposed to interfere with such possession, another court of competent jurisdiction may proceed in the same manner as if no such receiver had been appointed. * * * ”
The Texas statutes also further provide, in article 1389: “The existence of every corporation may be continued for three years after its dissolution from whatever cause, for the purpose of enabling those charged with the duty, to settle up its affairs. In ease a receiver is appointed by a court for this purpose, the existence of such corporation may be continued by the court so long as in its discretion it is necessary to suitably settle the affairs of such corporation.”
In Sterrett v. Second National Bank (C. C. A.) 246 F. 753, 754, 3 A. L. R. 256, the court says: “It is the settled rule that a mere chancery receiver is but an officer of the court appointing him, and that in the absence of some conveyance or statute vesting in him title to the debtor’s property he cannot sue in the courts of a foreign jurisdiction for its recovery upon the mere order of the appointing court, or without other authority than that arising from his appointment as receiver.”
The case just quoted involves the construction of the statutes of Alabama, and the court, after quoting from the statutes of Alabama on insolvent corporations and appointment and powers of receivers, states: “It will be seen that these statutes do not expressly confer title upon the receiver; that they, at least at first view, suggest generally a court direction and eontroU-an, ordinary chancery receivership. * * * ”
The Sterrett Case was carried to the Supreme Court of the United States, and that court in 248 U. S. 73, 39 S. Ct. 27, 28, 63 L. Ed. 135, says:
“The question presented for our consideration is whether the receiver appointed in the chancery court is authorized to sue in the-federal court for the recovery of such property.
“Since the decision of this court in Booth, v. Clark, 17 How. 322, 15 L. Ed. 164, it is the-settled doctrine in federal jurisprudence that a chancery receiver has no authority to sue in the courts of a foreign jurisdiction to recover demands or property therein situated. The-functions and authority of such receiver are confined to the jurisdiction in which he was-appointed. * * *" — citing Hale v. Allinson, 188 U. S. 56, 23 S. Ct. 244, 47 L. Ed. 389; Great Western Mining Company v. Harris, 198 U. S. 561, 25 S. Ct. 770, 49 L. Ed. 1163; Keatley v. Furey, 226 U. S. 399, 33 S. Ct. 121, 57 L. Ed. 273.
The court further says: “This practice-has become general in the courts of the United-States, and is a system well understood and' followed. It permits an application for an ancillary receivership in a foreign jurisdiction where the local assets may be recovered’, and, if necessary, administered. The system-established in Booth v. Clark has become the-settled law of the federal courts, and, if the powers of chancery receivers axe to be enlarged in such wise as to give them authority-to sue beyond the jurisdiction of the appointing court, such extension of authority must come from legislation and not from judicial action.”
In Lion Bonding & Surety Company v. Karatz, 262 U. S. 77, 43 S. Ct. 480, 484, 67 L. Ed. 871, in a certiorari proceeding to the-Eighth Circuit, the Supreme Court says : “The general rule that a receiver cannot sue-*175in a foreign jurisdiction applied” — citing Great Western Mining Company v. Harris, 198 U. S. 562, 25 S. Ct. 770, 49 L. Ed. 1163, and Sterrett v. Second National Bank, 248 U. S. 73, 39 S. Ct. 27, 63 L. Ed. 135.
There are many other opinions by the Supreme Court of the United States sustaining the rule as announced in Booth v. Clark. The court has examined the order appointing the receiver, and in his opinion there is nothing in this order which makes of this receiver anything other than a mere chancery receiver. His duties are defined therein, and he is at all times in the performance of those duties subject to the order of the court.
The court is of the opinion that the plaintiff has no legal authority to institute or maintain this action in this court and that therefore the court is without jurisdiction.
However, the appellate court might hold otherwise, and, since the court has heard the evidence in this case, the second question can be passed upon so that the appellate court in any instance can render a final judgment.
The evidence in this case disclosed that the defendant, Alexander, lives in Oklahoma City; that he saw in a newspaper that certain stock could be purchased in the Northwest Texas Building & Loan Association, earning 8 per cent, dividends; that by correspondence in August, 192®, and immediately thereafter, he purchased $4,000 worth of the stock and the following year withdrew $2,000, leaving $2,000 of his investment in the company.
It is the contention of the defendant that, since only $2,000 is involved, the court is without jurisdiction for the reason that the -amount is not $3,000 or more, but the bill alleges that the defendant withdrew $4,000, and the jurisdictional amount would be determined by the allegations of the petition rather than the amount which the plaintiff would be entitled to recover. Home Life Insurance Company v. Sipp (C. C. A.) 11 F.(2d) 474, Hampton Stave Company v. Gardner (8th C. C. A.) 154 F. 805.
On the merits of the controversy, the evidence clearly shows that, notwithstanding the facts that the minutes and records of the association disclosed that the defendant, Alexander, had been elected as director, no notice of said election was ever received by the defendant, and he had no knowledge that he had ever been elected director, and that the purported election was without his consent. He never had anything to do with the business, and was simply a purchaser of stock, living in another state.
It is very earnestly contended by the plaintiff that, since the association was insolvent at the time that the $2,000 was paid to the defendant, the company therefore should recover. The court does not agree with this contention. There is nothing in this evidence that indicates bad faith on the part of the defendant. In other words, he was merely another “sucker.” He thought he was buying something when he did not, but he never had any knowledge of the condition of the association except from the officers of said association; he relied entirely upon their representations as to their condition, and, since the defendant has acted in good faith throughout and the association has aeted in bad faith and was perhaps insolvent at the time that the stock was actually sold to this defendant and the $2,000 that was repaid to him was paid in the hope that his influence would be valuable to the association, that the association itself is certainly not entitled to take advantage of a situation created by itself, and in that respect the receiver stands in the shoes of the association.
Therefore, on the merits of the ease, the court is of the opinion that the plaintiff should not recover, and that judgment should he rendered for the defendant. The costs are taxed to the plaintiff and under the first proposition the ease is dismissed for want of jurisdiction. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218874/ | KIRKPATRICK, District Judge.
John W. Manns, a seaman on the American steamship Katahdin, was drowned on October 23,1917, as the result of a collision between the Katahdin and the Japanese steamship Tokuyama Maru in the Delaware river. He left Rodell Manns, a minor son, surviving him. On November 8, 1917, Rodell Manns, by his next friend, Robert Hall (a distant relative, a seaman on the Katahdin, and familiar with the facts), filed a libel in admiralty (No. 37 of 1917) in personam against Nippon Tusen Kabushiki, a Japanese corporation, owner of the Tokuyama Maru, to recover for the death of his father. A citation with foreign attachment clause issued on the libel and bond was filed. This suit was settled by the payment of a sum of money to Hall or his proctors, and the suit marked “discontinued, settled and ended.” While this was going on, there was pending in the same court a cause in rem — a libel by the master of the Katahdin against the Tokuyama Maru and a cross-libel by the owner of the latter against the former steamship. This is the present action, No. 35 of 1917. This action was also settled some time later, but never marked “discontinued,” and, so far as the court record appears, is still pending. By reason of the pendency of the settlement negotiations subsequently concluded, no stipulations for valué were ever actually entered on behalf of either vessel. Nor does it appear that the attachment against the Tokuyama Maru was ever returned nor that the • attachment against the Katahdin ever issued.
Rodell Manns came of age in 1930, and has filed this petition for leave to intervene in the apparently pending cause No. 35 of 1917.. He avers that the settlement effected by Hall in No. 37 of 1917 was inadequate, that the release given - was fraudulent, and that he (Manns) had no knowledge whatever of the filing of the action. I do not find in the petition an allegation that the minor has never received the money, but I believe that counsel stated that this was the fact.
The pleadings disclose no substantive right in the petitioner against the respondents. The only right which he ever had arose by virtue of the Pennsylvania Acts of Assembly of April 15, 1851, P. L. 669, and April 26, 1855, P. L. 309 (see 12 PS §§ 1601-1603). Western Fuel Co. v. Garcia, 257 U. S. 233, 242, 42 S. Ct. 89, 66 L. Ed. 210. This right has long since ceased to exist by reason of the statute of limitations which, in ease of a death statute, is more than merely procedural, and operates to extinguish the right itself. The Harrisburg, 119 U. S. 199, 7 S. Ct. 140, 30 L. Ed. 358; Western Fuel Co. v. Garcia, supra.
*181From the procedural side, the petitioner’s right to intervene depends upon General Admiralty Rule No. 34 (28 USCA § 723), which seems rather clearly to have reference only to eases where the res is in court. It has been so construed. The Flush (D. C.) 274 F. 133; Bennett Day Importing Co., Inc., v. Compagnie Francaise de Navigation a Vapeur (D. C.) 42 F.(2d) 295.
In Ex parte Indiana Transportation Co., 244 U. S. 456, 37 S. Ct. 717, 718, 61 L. Ed. 1253, the Supreme Court held that it was error to entertain jurisdiction of intervening petitions by the administrators of seaman who had been killed in a collision after the vessel had been discharged from arrest by a stipulation to answer the demands of the libel. The court said: “But appearance in answer to a citation does not bring a defendant under the general physical power of the court. He is not supposed, even by fiction, to be in prison. Conventional effect is given to a decree after an appearance because when power once has been manifested, it is to the advantage of all not to insist upon its being maintained to the end. Michigan Trust Co. v. Ferry, 228 U. S. 346, 353, 33 S. Ct. 550, 57 L. Ed. 867, 874. That, however, is the limit of the court’s authority. Not having any power in fact over the defendant unles's it can seize him again, it cannot introduce new claims of new claimants into an existing suit simply because the defendant has appeared in that suit. The new claimants are strangers and must begin their action by service just as if no one had sued the defendant before. The Oregon, 158 U. S. 186, 205, 210, 15 S. Ct. 804, 39 L. Ed. 943, 952, 953,”
If the action in personam (Hall, next friend of Mann’s, No. 37 of 1917) were still pending, the question of the effectiveness of the settlement and release to bind the minor, argued at length by the petitioner, might be of importance. But that action has been discontinued long ago, and this attempt to intervene is in an entirely different action.
The conclusion is that the petition must be dismissed, first, because the record discloses that the petitioner has no substantive right of which the court could take cognizance; and, secondly, because the res not being in court, the court has no jurisdiction to •entertain the petition.
It being conceded that a settlement was .actually effected, the petition of the libelants, respondents, cross-libelants, for an order directing the clerk to mark the suits “discontinued, settled, and ended,” is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218875/ | GALSTON, District Judge.
Two motions are presented which will be disposed of in this opinion.
*182The complainant moves for a preliminary injunction to restrain the defendants from serving upon the plaintiff any process in connection with the investigation of an income tax liability of one John M. Phillips, deceased, and from taking testimony of the complainant with respect to the property or assets of the late John M. Phillips.
The defendants move to dismiss the complaint on the ground that the court is without jurisdiction of the parties or of the subject-matter.
The complainant, as appears from his affidavit in support of the motion for a preliminary injunction, is an attorney. He was served on June 2, 1933, with a summons issued by the defendant Corwin, as collector of internal revenue for the first- district of New York, to appear before the said collect- or on June 7, 1933, to testify in a matter arising under the internal revenue laws, depending before him, the said collector, concerning the income tax liability of John M. Phillips. This summons was issued pursuant to section 3165 of the Revised Statutes, as amended, and section 3173 (26 USCA §§ 58, 94).
This attorney for a number of years had been the attorney for the late John M. Phillips. As appears from the complaint, the complainant refused to be sworn and refused to answer questions; and it is alleged that the defendants, through their subordinates, threatened to institute proceedings to have the complainant fined and imprisoned for his failure and refusals to testify, and that they did obtain ex parte, and without notice to the complainant, an order requiring the complainant to appear and give testimony in the aforesaid tax proceeding.
The ground of the relief sought is asserted to be that the summons and the subsequent proceedings instituted were without legal effect and were without the authority of the defendants acting in their official capacity, and that the proceedings were had in violation of the statutes of the United States and the rights given this complainant under the Constitution. Phillips died on July 30, 1928. It is alleged that prior to his death a complete investigation was had by the internal revenue authorities concerning his internal revenue tax liability, and that, as a result of such investigation, taxes and penalties were assessed in an aggregate sum in excess of $1,300,000; and that the statute of limitations has run and the internal revenue authorities are barred from conducting any further investigation respecting any income tax liability of the said John R. Phillips and from attempting to assess any further tax or penalties with respect thereto.
It in no way appears that this court has jurisdiction over the person of the defendant Helvering. He has not been served with process, has not consented to accept service of process, and his official residence is in the District of Columbia.
Section 739 of the Revised Statutes as amended, now Judicial Code § 51 (title 28, U. S. C. § 112 [28 USCA § 112]) provides: “ * * Except as provided in sections 113 to 118 of this title, no civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant; but where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant.”
The question was considered in Butterworth v. Hill, 114 U. S. 128, 5 S. Ct. 796, 29 L. Ed. 119.
It can hardly be asserted that the court cannot take judicial notice of the fact that the official residence of the Commissioner of Internal Revenue is in the District of Columbia; but, if that were not so, it is well settled that jurisdiction of the federal courts, must be affirmatively shown by the pleadings. Smith v. McCullough et al., 270 U. S. 456, 46 S. Ct. 338, 70 L. Ed. 682.
For these reasons the court has acquired no jurisdiction over the defendant Helvering; and it follows that the complaint as against him must be dismissed.
Now as to the remaining defendant and the subject-matter of the suit: This action seeks to prevent the examination of one deemed a necessary witness by the collector of internal revenue in a matter relating to the collection of a tax.
Plaintiff’s reliance is on Philadelphia Company v. Henry L. Stimson, Secretary of War, 223 U. S. 605, 606, 32 S. Ct. 340, 344, 56 L. Ed. 570. That suit was brought to restrain the Secretary of War from instituting criminal proceedings against a riparian owner. It was held that the plaintiff,. whose property rights had been invaded in fixing harbor lines, could maintain an action to restrain the Secretary of War, and that such action was not one against the United-States. Mr. Justice Hughes wrote:
“The exemption of the United States from . *183suit does not protect its officers from personal liability to persons, whose rights of property they have wrongfully invaded. *’ * * And in ease of an injury threatened by his illegal action, the officer cannot claim immunity from injunction process. The principle has frequently been applied with respect to state officers seeking to enforce unconstitutional enactments. * * And it is equally applicable to a Federal officer acting in excess of his authority or under an authority not validly conferred.
" * * * The su rests Upon the charge of abuse of power, and its merits must be determined accordingly; it is not a suit against the United States.”
Plaintiff, in seeking to apply the doctrine of Philadelphia Company v. Stimson, contends that the collector acted in excess of his powers in issuing the summons in question, in that in this matte he had no power to issue any summons. So far as insistence is had on the statute of limitations as a bar, it may be said that it does not lie in the mouth of plaintiff to assert that the statute of limitations has run against the Phillips estate. Conceivably, such a defense might be asserted by the representatives of that estate in an action brought by the United States government against them. But, be that as it may, the Internal Revenue Law confers adequate powers on the defendants to compel the attendance and examination of the plaintiff. The collector’s summons indicates that he acted pursuant to the provisions of Revised Statutes, §§ 3165, as amended, and 3173 (U. S. C. title 26, §§ 58 and 94 [26 USCA §§ 58, 94]). The former section provides that: “Every collector, deputy collector, internal-revenue agent, and internal-revenue officer assigned to duty under an internal-revenue agent, is authorized to administer oaths and to take evidence touching any part of the administration of the internal revenue laws with which he is charged, or where such oaths and evidence are authorized by law or regulation authorized by law to be taken. * * *”
Now this section makes no reference to the issuance of summonses, and, if it contemplated the compulsion of attendance on the part of witnesses whose evidence was to be taken and to whom oaths were to be administered, standing alone it is defective in that respect. However, it may be read in connection with the Revenue Act of 1928, § 618 (U. S. C. title 26, § 1247 [26 USCA § 1247]). This section gives the Commissioner power to require the attendance of the person rendering the return or of any officer or employee of such person, or the attendance of any other person having knowledge in the premises, and the Commissioner may take his testimony with reference to any matter required by law to be included in such return. See Brownson v. United States (C. C. A.) 32 F.(2d) 844. 1
However, even if sufficient power cannot be spelled from the revenue laws to justify the issuance of the summons and to compel the attendance of the plaintiff as a witness, there is nothing in the premises which calls for this court to exercise its equitable jurisdiction. To justify the court in so doing, it should appear that the plaintiff has not or will not have, in the event of a threatened alleged abuse of power by the collector, an adequate remedy at law. Such a remedy is clearly afforded by the provisions of Revised Statutes, § 3175 (U. S. C. title 26, § 96 [26 USCA § 96]), which requires the judge, before the issuance of a body attachment, to have satisfactory proof that the person summoned has been lawfully summoned. Such is the legal and orderly procedure for conserving the rights of this plaintiff. He is thus given the fullest opportunity and all the relief that he seeks in the equity suit".
Accordingly, the motion for a preliminary injunction is denied; and the motion to dismiss the complaint is granted.
Settle order on notice.
As to section 3173 of the Revised Statutes (U. S. C. title 26, § 94 [26 USCA § 94]), I agree with the plaintiff that it gives no power to the collector, in circumstances such as are suggested in this proceeding, to issue such summons as was served. The section relates only to instances in which there has been a failure to file a return. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218876/ | GALSTON, District Judge.
This is a motion-for judgment in favor of the United States against Michael Santantonio and George S. Van Sehaiek, superintendent of insurance of the state of New York, as liquidator of the Greater City Surety & Indemnity Corporation, upon the bond filed herein for the release of the above named vessel.
On October 29, 1931, this libel was filed against the Greyhound for forfeiture for breach of the provisions of sections 4336 and 4377 of the Revised Statutes (46 USCA §§ 277, 325).
The yacht was licensed as a “pleasure vessel.” On or about October 16, 1931, the collector of customs seized the yacht and her cargo consisting of thirty-seven barrels of Scotch malt in violation of the provisions of the Revised Statutes, §§ 4336 and 4377 (46 USCA §§ 277, 325).
Some time thereafter the vessel was released to the claimant, Michael Santantonio, upon the filing of a bond in the sum of $10,-000, pursuant to section 938 of the Revised Statutes (28 USCA § 751), with said Michael Santantonio, as principal, and the Greater City Surety & Indemnity Corporation, as surety.
On the 5th of April, 1933, the libelant moved for an order directing the claimant to furnish a new and adequate security pursuant to Rule 8 of the Admiralty Rules of the Supreme Court of the United States (28 US CA § 723). On May 29, 1933, an order was entered herein directing the claimant to file such new and additional security with leave to renew the motion for judgment on said bond if such new and additional security were not filed in the office of the clerk of the court within ten days from the date of the entry of this order. No such bond has been filed. -
It further appears that on January 25, 1933, the Supreme Court of the state of New York entered an order directing the respondent, George S. Van Sehaiek, superintendent of insurance of the state of New York, to take possession of the property and liquidate the business and affairs of the Greater City Surety & Indemnity Corporation pursuant to the provisions of article 11 of the Insurance *185Laws of the state of New York (Consol. Laws N. Y. c. 28). The superintendent of insurance, by virtue of said order, took possession of the property and assets and assumed the liabilities of the Greater City Surety & Indemnity Corporation and is now liquidating the affairs of the said surety company.
In consequence, the United States of America now seeks an order directing judgment in favor of the United States of America in the amount of the aforesaid bond against the principal, Michael Santantonio, and George S. Yan Schaick, superintendent of insurance of the state of New York, as liquidator of the Greater City Surety & Indemnity Corporation.
The application is resisted on the ground that the corporation is dissolved and no judgment can be rendered against a dead corporation, and because the order of the Supreme Court of the state of New York restrains the bringing of any action against the eorporaration or its estate or the superintendent of insurance of the state of New York.
It appears that the respondent relies principally on Lion Bonding & Surety Company v. Karatz (Department of Trade & Commerce of the State of Nebraska et al. v. Hertz et al., as Receivers of Lion Bonding & Surety Company) 262 U. S. 77, 43 S. Ct. 480, 484, 67 L. Ed. 871. It is there said: “Where a court of competent jurisdiction has, by appropriate proceedings, taken property into its possession through its officers, the property is thereby withdrawn from the jurisdiction of all other courts. Wabash R. R. Co. v. Adelbert College, 208 U. S. 38, 54, 28 S. Ct. 182, 52 L. Ed. 379. Compare Oklahoma v. Texas, 258 U. S. 574, 581, 42 S. Ct. 406, 66 L. Ed. 771. Possession of the res disables other courts of co-ordinate jurisdiction from exercising any power over it. Farmers’ Loan & Trust Co. v. Lake Street Elevated R. R. Co., 177 U. S. 51, 61, 20 S. Ct. 564, 44 L. Ed. 667. The court which first acquired jurisdiction through possession of the property is vested, while it holds possession, with the power to hear and determine all controversies relating thereto. It has the right, while continuing to exercise its prior jurisdiction, to determine for itself how far it will permit any other court to interfere with such possession and jurisdiction. Palmer v. Texas, 212 U. S. 118, 126, 129, 29 S. Ct. 230, 53 L. Ed. 435.”
The difference between the ease at bar and the ease thus quoted is obvious. There is no conflict herein as to the possession of property vested in the superintendent of insurance. This action does not seek the possession of the res held by the superintendent of insurance. On the contrary, it seeks merely a judgment which would enable the United States of America in the liquidation proceedings to file a claim with the liquidator based on said judgment. In essence, the libelant is seeking to perfect its forfeiture proceeding.
The United States District Court has exclusive jurisdiction over all seizures under the laws of the United States and over all suits for penalties and forfeitures incurred under such laws. The state of New York .can in no way limit such exclusive jurisdiction. The only proper forum for the adjudication of the claim of the United States of America upon this bond is the federal court and not the office of the superintendent of insurance of the state of New York. Title 28 U. S. C. § 41., subds. 1 and 9, 28 USCA § 41 (1, 9); § 371.
That no independent suit need be instituted against the surety company appears from the language of the bond itself: “And, it is further conditioned, that, if judgment passes against the claimant, as to the whole or any part of said Gas Yacht ‘Greyhound,’ and the claimant does not within twenty (20) days thereafter pay into the Court the amount of the appraised value of such Gas Yacht ‘Greyhound,’ or such sum as the Court may decree, with costs, judgment shall be granted on this bond, on motion in open Court, without further delay.”
Finally, in respect to the practice governing the furnishing of better security, attention is called to rule 10 of the Admiralty Rules of this Court, which provides: “10: Stipulation, Better Security on: Any party having an interest in the subject matter of the suit may at any time on two days’ notice, move the Court on special cause shown for greater or better security; and any order made thereon may be enforced by attachment, or otherwise.”
The motion is granted. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218879/ | BOURQUIN, District Judge.
In the case reported in (D. C.) 3 F. Supp. 348, after execution unsatisfied, plaintiff presented affidavit that defendant has property it unjustly refuses to apply to satisfy the judgment, money due from unknown persons in Montana, and that the National Surety Corporation, in application for license to do business in Montana, has admitted it has under its control personal assets of defendant exceeding the judgment.
Thereupon citation was ordered to defendant and the corporation to “answer concerning the said matters in the affidavit,” but the citation issued, directed to defendant and the corporation, is only to answer “concerning any property real or personal in the possession or under the control of the” corporation belonging to defendant or in which it has interest or claim.
To the citation the answer of defendant by local counsel verified on information and belief is that, pursuant to the laws of New York of which defendant is a corporation, the superintendent of insurance of that state made application to a Supreme Court thereof for an order to take possession of all defendant’s property and rehabilitate defendant; that thereupon the court enjoined every one everywhere from any interference by judgment or otherwise with defendant or its assets; that said superintendent has taken and now has possession of all defendant’s property; and that defendant has no property in Montana “that a receiver might administer.” The corporation did not answer.
It appears the citation was served upon the insurance commissioner of Montana, doubtless assumed to be pursuant to statute. But it do® not appear that the statute applies, for there is no evidence that the corporation has appointed the commissioner its attorney to that end, a statutory prerequisite to valid service. Sections 6212, 6213, Rev. Codes Mont. 1921. Hence, no service, the proceedings so far fail.
However, with the affidavit, plaintiff served upon defendant notice of application for the receivership usual in supplementary proceedings. There is no evidence defendant has any property within the jurisdiction or elsewhere, save the inference from the negative pregnant conclusion in the answer. It does appear that April 29, 1933, in a Supreme Court in New York, the state of defendant’s incorporation, the state’s superintendent of insurance, pursuant to the state law, representing it was on defendant’s request, applied for authority to take possession of defendant’s property, conduct its business, and rehabilitate defendant according to plan submitted, in the mesne time the usual injunction to issue against suits, etc. The court forthwith issued an order to show cause accordingly.
There is no evidence that the superintendent was granted authority to possess defendant’s property and conduct its business, no evidence any injunction issued; but in what purports to be a decision of the court, without certification thereof, it is stated the court had approved the plan of rehabilitation. That the plan has been executed do® not appear. Of the plan itself little need be said, save it seems ingeniously devised to discriminate between creditors without even pretense of justification, to multiply offie®, officers, salaries, and expense, whether or not also usual bonuses, commissions, etc. For it involves not restoration of defendant to financial health, but transfer of all its assets to some three new corporations, one of which is the corporation herein and the shares of which would be transferred to defendant.
A proposed agreement between the superintendent and the corporation provides for transfer to the latter of some $12,000,000 assets of defendant, no doubt the cream of them, and the only assets of the corporation, in return for which the corporation exchanges its capital stock. These assets do not inure to the benefit of creditors in plaintiff’s category, but only to creditors of subsequent date. The former’s fate depends upon whatever other and undeseribed assets, if any, defendant has, and which by the plan are to be conveyed to another of the three corporations for the benefit of creditors and stockholders of defendant.
In the eircumstanc® the plan needs no further comment than the observation that, if *196it is anything but a strategic substitute for discredited if not outmoded receiverships, and open to the same but more aggravated abuses and scandals, it is not apparent. In fact, defendant merely shifts its assets from an old pocket to a new, changes the old label company to the new corporation, and its and the same officers in charge of both — mere legal thimble-rigging to defeat creditors.
Of the indefinite, ambiguous, and more or less incompetent nature of defendant’s answer and evidence, plaintiff makes no complaint. His attitude seems to be that the court should enjoin the corporation from any disposition of the assets “until an order of application of the property is made and five days allowed the Corporation to obey it.” If disobeyed, sale by the Marshal of said assets, or until plaintiff can prosecute to conclusion some appropriate suit. Defendant argues the proceedings should be dismissed, citing Relfe v. Rundle, 103 U. S. 222, 26 L. Ed. 337; Converse v. Hamilton, 224 U. S. 243, 32 S. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292. It suffices to say the circumstances of this case do not serve to bring it within the doctrine of those cases.
As appears, no order can be made affecting the corporation. No reason is perceived, however, why, in conformity to the local statutes, the plaintiff may not have an order that defendant on oath in positive terms by some of its responsible officers shall file herein.a list of assets owned by it in this state and/or elsewhere, and thereupon apply sufficient to satisfy the plaintiff’s judgment. Or a receiver may be appointed.
And until ordered otherwise, defendant is enjoined from any transfer of any its assets. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218881/ | ADDER, District Judge.
This is an action brought by Remington-Rand, Inc., for the recovery of manufacturer’s excise tax paid by the Rand Company, Inc., for the period July 3, 1924, to September 30, 1925, in the amount of $6,237.88, and the sum of $2,312.38 paid by the Rand Cardex Company, Inc., for the period September 30, 1925, to February, 1926, making a total amount assessed of $8,550.26, together with interest thereon.
The principal question involved in this case is whether or not the automatic player piano sold by the Rand Company is subject to taxation as a. coin-operated device under the provisions of section 600 of the Revenue Act of 1924 (26 USCA § 881 note). A further question involved is whether the Remington-Rand, Inc., succeeded to the claims of its predecessor companies.
Recent acts of Congress providing for excise taxes applicable to this case were passed in 1918,1921, and 1924. The Revenue Act of 1918, § 900 (40 Stat. 1122), provides for a tax on (4) pianos, organs (other than pipe organs), piano players, graphophones, phonographs, talking machines, music boxes, and records used in connection with any musical instruments, piano players, graphophones, phonographs, or talking machines. Paragraph 16 provides for a tax upon automatic slot device vending machines, etc. This act of 1918 was superseded by the Revenue Act of 1921 (section 900 [42 Stat. 291]), which omitted paragraph (4) of the 1918 act on pianos, etc., and retained the tax on automatic slot device vending machines using the same language in paragraph 11 of the 1921 act as was used in paragraph 16 of the 1918 act. The Revenue Act of 1921 was in turn superseded by the Revenue Act of 1924, which is in substantially the same language as the act of 1921, with the single exception that, instead of using the words “automatic slot-device vending machines,” the Revenue Act of 1924 has changed the language to “coin-operated devices, coin-operated machines, and devices and machines operated by any substitute for a coin.” It is under the Revenue Act of 1924 that the tax was levied in this case. The history of the legislation is pertinent in determining whether the player piano manufactured and sold by the plaintiff is taxable under the 1924 act.
It is clear that it was the intention of Congress in passing the Revenue Act of 1921 to remove from taxation under that act musical instruments which were taxed under paragraph 4 of the 1918 act. Paragraph 4 of the 1918 act made no reference' to slot devices in connection with musical instruments. Paragraph 16 of the 1918 act taxing “automatic *200slot-device vending' machines” was retained with the same language in the 1921 act.
The case of Seeburg Piano Company v. United States, reported in 62 Ct. Cl. page 281, was decided under the Revenue Act of 1921. It was there held that an electrical piano operated upon the deposit of a coin in a slot provided for that purpose is not a slot device vending machine within the meaning of paragraph 11 of that act. The opinion in that case, while it states that the repeal of paragraph 4 of the act of 1918 is significant, finds it necessary to discuss the question of whether the coin device on the piano brings it within the paragraph levying a tax upon automatic slot device vending machines, and concludes with: “We do not treat the hearing of music as a sale of the same.” By this language the court in that ease took the position that operating a piano by depositing a coin did not make it a vending machine. It is true that the opinion goes further and states the view that the repeal of paragraph 4 of the 1918 act discloses an intention to relieve all music from taxation however produced. I am not inclined to agree with this conclusion, especially in view of the change in the law made by the act of 1924.
In 1924 the language “automatic slot-deviee vending machines” was changed to “coin-operated devices, coin-operated machines, and devices and machines operated by any substitute for a coin.” This language makes it unnecessary to diseuss whether or not the piano in question is a vending machine. It seems to me clear that, if plaintiff’s piano is a coin-operated device or a coin-operated machine, it comes within the language of the things it was intended to tax. Whatever it was, it was a device or a machine operated by a coin or by a substitute for a coin. There was evidence at the trial that the piano could be played from the keyboard without the use of the coin-operating device. The statute, however, is not made to apply to exclusively coin-operated devices, and the fact that the device or machine could be made to operate in some other way than by the insertion of a coin would not take it out of the statute. Nor do I think that the fact that a comparatively small part of the cost of the instrument is chargeable to the coin-operating mechanism has weight in determining whether or not the instrument is coin-operated.
The case of American Meter Co. v. McCaughn (D. C.) 1 F. Supp. 753, although recently decided, afose under the Revenue Act of 1921, and is not in point.
My conclusion is that the plaintiffs piano is a coin-operated device within the meaning of the taxing statute.
The defendant contends that the plaintiff cannot maintain this aetion, for the reason that it was not the party in interest in this transaction and paid none of the taxes in question, and that this case is brought within the provisions of section 3477 of the Revised Statutes (31 USCA § 203). While I am inclined to the opinion that section 3477 does not apply in this ease, yet I find it unnecessary to pass upon that question in view of my conclusion that the tax paid has been properly levied.
Judgment may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218882/ | GALSTON, District Judge.
A motion is made by the Chase National Bank, a creditor, for an order permanently staying and enjoining the bankrupt from prosecuting his application for discharge and excepting from any discharge in this proceeding any and all debts such as were or. are provable in a prior proceeding in bankruptcy brought by the said bankrupt in this court.
It appears that on March 25, 1933, the bankrupt filed a petition in this proceeding. In connection with the petition, the bankrupt filed a schedule setting forth all of his debts, as well as a schedule of his assets.
The debts listed were those to the Chase National.,Bank, of two notes, one in the amount of $21,300, and a second in the sum of $54,000; and the only other debt was to one Olga Mayer.
The assets disclosed consisted of a note made by one John C. Strauss in the sum of $15,000, stated to be of no value, some policies of insurance alleged by the bankrupt to be no part of his estate in bankruptcy, some personal wearing apparel, an'd certificates of preferred stock of Triple A Hosiery.
The petition sets forth that the debts, creditors, and assets recited in the schedules are the same debts, creditors, and assets set forth in the schedules filed in the proceeding in bankruptcy commenced in this court on the bankrupt’s petition on March 26, 1932, a year less a day prior to the commencement of this present proceeding; and the debt to the Chase National Bank in such proceeding is the same debt listed in the schedules in the present proceeding.
In the proceeding initiated by the bankrupt, by the petition filed on March 25, 1933, no application was made by him for a discharge, and no order for such discharge or for an extension of time within which to apply for the discharge was ever made.
On April 28,1933, in the present proceeding, the bankrupt filed an application for a discharge, and a hearing upon the application was ordered on the 9th day of June, 1933, and adjourned. The petitioner received a notice of such order, though it has not filed any proof of claim in either proceeding.
In the earlier proceeding, the bankrupt secured an order, restraining, among others, the Chase Natioñal Bank from taking any further steps in actions which had been commenced in the Supreme Court of the state of New York, county of New York, by the Chase National Bank against the bankrupt, until one year from the date of the adjudication in bankruptcy, or if within that time the bankrupt should apply therein for a discharge, then in such event until the question of such discharge should be determined.
On October 10, 1932, an order was made in said earlier proceeding in bankruptcy closing the case.
The failure of the bankrupt to obtain a discharge in the first proceeding clearly bars the bankrupt from applying for a discharge in the second proceeding as to debts provable in the first proceeding.
In the case of Kuntz v. Young (C. C. A.) 131 F. 719, 721, it appeared that in January, 1899, Kuntz was adjudged a bankrupt in one of the divisions of the District Court of Minnesota. The bankrupt made no application for a discharge within twelve months of his adjudication. While the involuntary proceeding was still pending, Kuntz filed a voluntary petition in bankruptcy in another di*204vision of the court, scheduling the same debts and creditors that appeared in the involuntary proceeding. The Circuit Court of Appeals, speaking through Judge Sanborn, said: “The failure of the bankrupt to apply for a discharge from his debts in the involuntary proceeding within 12 months after the adjudication foreclosed his right to such a discharge. It is only within that time that he may, under the bankruptcy law, make a lawful application to be relieved from his debts. The record of his failure to make the application in that proceeding was, in effect, a judgment by default in favor of his creditors to the effect that he was not entitled to a discharge from their claims. A judgment by default renders the issue as conclusively res adjudicata as a judgment upon a trial.”
The court added: “A voluntary proceeding in bankruptcy for the sole purpose of obtaining a discharge which a prior involuntary proceeding has conclusively determined that the bankrupt is not lawfully entitled to presents no ground for relief, is vexatious and futile, and should be dismissed. In re Fiegenbaum, 57 C. C. A. 409, 121 F. 69.”
In Re Schwartz (D. C.) 248 F. 841, in similar circumstances, that is, wherein the bankrupt failed to apply for a discharge within the period limited by the act in the first proceeding, and thereafter sought discharge in a second proceeding, it was held that he was barred from obtaining a discharge against the debts scheduled and provable in that proceeding, and he was enjoined from so doing. See, also, Freshman v. Atkins, 269 U. S. 121, 46 S. Ct. 41, 70 L. Ed. 193; In re Silverman (C. C. A.) 157 F. 675.
I think the inference is inescapable that the bankrupt herein sought indirectly, by the filing of the second petition,.to extend the period within which he might file an application for discharge. It is futile to argue, as he does, that, because the first proceeding was marked “closed” before the expiration of the statutory period within which he might apply for a discharge, he was by such act barred from making such application. He could not have been deprived of his statutory right. Bankruptcy Act, § 14 (11 U. S. C. § 32 [11 USCA § 32]).
The motion is therefore granted to the extent of excepting from any discharge in this proceeding any and all debts such as were or are provable in the prior proceeding.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218883/ | FRANK J. COLEMAN, District Judge.
The collision occurred on December 14, 1917, at about 2:50 a. m. in New York harbor between Staten Island and Norton’s Point, while both steamers were at anchor. An 88 mile an hour gale was blowing at the time, and the question presented is whether the Pocahontas, dragging her anchor, drifted onto the San Tirso, or whether the latter, with her engines working in an effort to offset dragging, ran into the Pocahontas. The courts have already considered this storm and have held that the warnings had been such as to require all vessels to be secure before it broke [Clyde Steamship Co. v. United States (C. C. A.) 27 F.(2d) 727;The British Isles and Brigdo (C. C. A.) 264 F. 318]; so it is undisputed that any movement of either vessel which may have caused the collision was negligent, and the only question is which one of the two so moved.
Fifteen years elapsed between the occurrence and the trial, due to the necessity for congressional legislation to permit the litigation; and the result is that the testimony of all the eyewitnesses is deprived of much of its probative force. Contemporaneous records and statements and considerations of general probability seem to me of more importance than contradictory testimony as to specific facts after so long an interval. The question of which vessel moved into collision has three aspects: First and most important, Which vessel was to windward when the storm broke? Second, Is there convincing testimony of eyewitnesses that the Pocahontas did not drag her anchor? And, third, Was the San Tirso moving under her own power at the time of the collision?
The San Tirso, a heavily loaded oil tanker, 420 feet long and of 6,236 gross tonnage, had come into the harbor from the sea on the afternoon of December 13th, and had anchored above Ambrose Channel at 5 p. m., when the visibility was still good. She took her bearings at that time, recording them in her log, and these when plotted at the trial showed her to have been about the middle of the channel between Staten Island and Norton’s Point. She put out a 6,800-pound port anchor on a 60-fathom chain which she later increased to 105 fathoms, and did not take it up again till after the collision. .
The Pocahontas, 564 feet long and of 10,893 gross tonnage, formerly a transatlantic passenger steamer, but at that time used as a troop transport, had left her anchorage in Gravesend Bay at about 8 p. m. on the same evening with the purpose of proceeding to sea, but, after being under way for some time, was ordered by wireless to return to her anchorage. On account of heavy snow .then falling, the visibility was very poor, and, rather than risk collision with other vessels on the anchorage grounds, she determined to anchor where she was, though she was unable to take bearings and had no definite knowledge of her position. Without sighting the San Tirso, she put out her port anchor on a 45-fathom chain.
The storm continued throughout the night with a snowfall of more than 6% inches, which with other weather conditions produced very low visibility from both vessels. The wind was northeast and about 30 miles an hour until about 2 :40 a. m., when within a few minutes it changed to northwest and rose to 88 miles an hour. Shortly after the change, the San Tirso was sighted from the Pocahontas at a distance of about 70 feet off the starboard bow. They came together at an angle of about 70° between the Pocahontas’ starboard sid.e and the San Tirso’s port side, the latter’s stem coming in contact with the Pocahontas on the starboard bow. After the blow, the vessels came alongside and their relative positions changed, so that the San Tirso’s bow projected about 20 feet beyond the other’s. *210They remained so till after daylight, when the San Tirso hauled off to starboard.
In the morning, while they were still together, bearings were taken which showed them at a place 1,100 feet southeasterly or to leeward of the position plotted for the San Tirso as of the time she anchored. It is contended by the opposing side that the San Tirso had dragged much of this distance and was seeking to offset it under her own power when the collision occurred; and this, of course, is denied. The difference in the positions of the San Tirso loses much of its significance on the question of whether she dragged, when it is considered that she originally had 60 fathoms of chain out and veered an additional 45 fathoms during the storm, that the wind changed its direction 90°, and that there was probably some inaccuracy in the bearings taken and in the plotting. The difference remains an item of evidence for the Pocahontas, but not very reliable.
On the other hand, it appears quite clear to me that, when the Pocahontas came to anchor, the pilot thought he was on the western side of the channel at a point which would have been westerly from the San Tirso and to windward when the storm broke. Not only did some one on a passing pilot boat inform him that the westerly buoy marking the entrance to Ambrose Channel bore southeasterly from him, but he had been following a course designed to bring him down the westerly side of Ambrose Channel on his way to sea, and in stopping his ship he headed her toward the west as though to anchor out of the way of ships using Ambrose Channel. Furthermore, her navigation officer reported the next day that her position on anchoring was northwesterly from the entrance to Ambrose Channel, and this was corroborated by the report of the captain.
It is true at the trial 15 years later the pilot testified to seeing the easterly buoy of Ambrose Channel, but this contradicts all that he stated soon after the accident. The testimony of Hellweg, captain of the Pocahontas, as to skirting the anchorage grounds on the easterly side near Coney Island, and sighting the ships Antigone and Covington, also seems to me incredible. Not only is it contradicted by his subordinate Sutherland and inconsistent with the anchoring position established in the contemporaneous reports, but it is improbable. Why on so bad a night as that should a steamer intending to go to sea travel over or near a crowded anchorage ground on the wrong side of the channel? Furthermore, the captain was exceedingly evasive in his answers, and seemed determined not to admit any fact which might tend to prove his . responsibility for the collision.
Considering only the direct evidence of the locations of the two vessels at the time of anchoring, there is in my opinion a clear preponderance in favor of a finding that the Pocahontas was on the westerly side of the channel at a point to windward of the San Tirso after the storm broke.
The direct evidence that the Pocahontas did not drag was the testimony of the boatswain’s mate stationed on the forecastle head to watch the anchor chain and the testimony of an officer who observed the drift line on the stem. The movement of the anchor chain is the most trustworthy means of determining whether the ship is dragging, and the boatswain’s mate testified it did not move; but his observation or his recollection after 15 years was so faulty that he did not know there had been a terrific squall in which the wind had increased from 30 miles an hour to 88 miles within a few minutes. The officer testified that the drift line indicated no dragging, but this was a very unreliable test. At just about the time of the collision the Pocahontas’ starboard anchor was let go and held underfoot, but whether this was because of the strength of the wind or on account of the proximity to the San Tirso is in doubt.
Immediately after the collision, all the anchor chains lay off to starboard, which was the side upon which the San Tirso lay. It is undisputed that, when the vessels came to rest with the San Tirso projecting 20 feet beyond the bow of the Pocahontas, the latter’s chains cut across or under the bow of the San Tirso and the latter’s chain also lay off to starboard. I have tried to the utmost of my ability to determine the significance of this fact, but must confess that either through my own stupidity or through the failure of counsel and witnesses to give me sufficient light I am unable to see in it a conclusive circumstance. It seems to me such might have been the position whichever ship had dragged. There are so many unknown or indefinite conditions which would enter into the matter that it is impossible for me to see that the position of the chains was inconsistent with either version of the collision. The speed with which the ships would change their positions with the sudden change in the direction and force *211of the wind, the relative rates at which the how of each ship would change under the influence of the wind in comparison with the rate of its stern, the degree to which the flood tide would offset the effect of the wind, all enter into a determination of what would be the position of the chains. Certainly the Pocahontas with its much larger superstructure would be more influenced by the gale, and it seems to me that, if she had not completed her swing with the change in the direction of the wind, she might have dragged her anchor and approached the San Tirso somewhat broadside. Whether her chain would be leading off to starboard or to port would in part depend upon whether her stem had swung more quickly than her bow.
It is undisputed that the San Tirso engines were working at about the time of the collision. It is her story that she used them only after the collision and not for the purpose of offsetting any drag on her part. According to her engine room log, they were operated at slow ahead at intervals for an aggregate of about four minutes, between 2:50 a. m: and 2:59 a. m., which was after the collision. It is undenied that as the boats approached each other the San Tirso’s running lights were lit, indicating that she was navigating, and there is no explanation of this fact. While it is not apparent why the engines should have been worked ahead after the collision, I believe the contemporaneous log entries are correct as to the degree and duration of their operation, and that it was, therefore, not extensive, especially in view of the 88 mile hurricane which was blowing. The difficulties under which the depositions of the San Tirso’s witnesses were taken probably account for the incompleteness of the explanation, and I believe that a preponderance of the evidence requires a finding that the engines were worked only after the collision.
Under all the circumstances, it is a most difficult task to determine what were the actual facts, but it seems to me that the probabilities favor the San Tirso. The Pocahontas was anchored to windward, and because of her superstructure was more exposed to the force of the storm. Furthermore, she was more unwieldy in heading into the wind, and had a shorter chain out to hold her. It would have been impossible, of course, for the San Tirso to have dragged bow foremost, and I do not believe that her engine operation was the cause of the collision.
These conclusions are corroborated by the government’s formal admissions made in 1921 in a previous suit brought by the owner of the San Tirso which was dismissed. In its answer in that suit the government admitted that “under the combined influence of the wind and tide the S. S. Pocahontas started her anchor and drifted approximately broadside to the wind, down on the S. S. San Tirso, to leeward,” but presumably pleaded vis major as an excuse. The admissions were alleged to have been made upon documents and statements in the possession of the government attorney. Certain documents, the quartermaster’s notebook and the rough log of the Pocahontas, .were not produced at the trial, and undoubtedly they would have been important upon the questions raised. While the evidence shows that they were destroyed in accordance with the regular practice in the Navy, it would seem to have been at least reckless to do so when their importance at any trial involving the serious collision should have been apparent.
Settle decrees accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218884/ | CAVANAH, District Judge.
This is an action brought against a surety on its bond given under an act of Congress for the benefit of those furnishing labor and materials on public works of the United States. The action as to the claim of plaintiff, Taylor, was dismissed, but it is continued upon the complaint in intervention of Havemann, who alleges that he furnished goods, wares, merchandise, and materials for the performance of the work to be done under the contract, covering section 3, Salmon-Montana Line National Forest Road, between station 1002 — 50 and station 1340 — 00. The statute (40 USCA § 270) provides that any contractor upon public work of the United States must give a bond “with the additional obligation that such contractor or contractors shall promptly make payments to all persons supplying him or them with labor and materials in the prosecution of the work provided for in such contract.” The bond provides that there shall be no liability if the contractor “shall well and truly pay aíl and every person furnishing material or performing labor in and about the improvement of said highway all and every sum or sums of money due him, them or any of them, for all such labor and materials for which the contractor is liable.”
The statute and similar bonds have been before the federal courts often for interpretation, and they have been given a liberal construction in order to effectuate the purpose of Congress as declared in the aet, and to protect those who furnish labor or materials in the prosecution of public works. Illinois Surety Co. v. John Davis Co., 244 U. S. 376, 37 S. Ct. 614, 61 L. Ed. 1206; U. S., for Use of Hill, v. American Surety Co., 200 U. S. 197, 26 S. Ct. 168, 50 L. Ed. 437. And in so *213interpreting the act, and a bond issued thereunder, the Supreme Court, in the case of Brogan v. National Surety Company, 246 U. S. 257, 38 S. Ct. 250, 251, 62 L. Ed. 703, L. R. A. 1918D, 776, has taken into consideration special circumstances • under which the supplies were furnished, and has not limited the application of the act to labor and materials directly incorporated into the public work. Brogan v. National Surety Co., supra; Title Guaranty & Trust Co. v. Crane Co., 219 U. S. 24, 31 S. Ct. 140, 55 L. Ed. 72; U. S. Fidelity & Guaranty Company v. U. S. ex rel. Bartlett, 231 U. S. 237, 34 S. Ct. 88, 58 L. Ed. 200. In the Brogan Case, the court said that “the Standard Contracting Company undertook to deepen the channel in a portion of St. Mary’s river, Michigan, located 'in a comparative wilderness at some distance from any settlement. There were no hotels or boarding houses’ and the contractor 'was compelled to provide board and lodging for its laborers.’ * * * The Circuit Court of Appeals [228 F. 577, L. R. A. 1917A, 336] deemed immaterial the special circumstances under which the supplies were furnished and the findings of fact by the trial court that they were necessary to and wholly consumed in the prosecution of the work provided for in the contract and bond. In our ^opinion these facts are not only material, but decisive.”
Approaching then a consideration of the present case, with the views in mind as expressed by the Supreme Court, the evidence shows that section 3 of the highway, covered by the contract and bond, is located in the mountains at some distance from any place where supplies, blaeksmithing and repairs to equipment, or facilities for boarding the men, could be secured, and that they had to be transported a long distance after the construction of a road oh the mountainside where the work was being done. In that regard the situation is in some respects similar to those in the Brogan Case. Intervener now seeks a recovery of $2,805.41 of his alleged claim of $2,967.17, after allowing certain credits admitted by him, upon the contention that materials to that amount were furnished to the subcontractor of Craven & Co. The defendant surety company admits that intervener is entitled to recover the sum of $400, leaving then $2,405.41 of intervener’s claim in dispute.
Upon the evidence there are two disputed questions involved: First, are the items of such a character as to come within the meaning of the word “materials,” and the term “in the improving of the highway”, used in the bond, and under the statute “in the prosecution of the work?” And, second, were they used in the improving of the highway and in the prosecution of the work provided for in the contract? In determining what items were used in the improving of the highway and in the prosecution of the work under the statute and contract, we are confronted with the broad interpretation placed upon the statute by the Supreme Court and the consideration given by that court of special circumstances under which the supplies were furnished.
The work here was located some distance from any settlement, and there were no boarding houses, making it necessary for the subcontractors to provide board and lodging for their laborers. Groceries and provisions, feed for horses, blaeksmithing equipment, coal, grease, gas, oil, commissary and office equipment, were used in the prosecution of the work, and freight paid. A summary of the items becomes necessary in order to determine what are allowable and what are not under the statute and bond. For convenience, reference will be made to plaintiff’s exhibits, which contain the different classes of items relied upon by him.
Plaintiff’s Exhibit No. 3 covers horse feed used on the work and freight on same. It would seem that these-items are allowable, after deducting $91.41, materials furnished Russell & Cole, and $21.60 hay not used, leaving a balance of $1,013.12.
Plaintiff’s Exhibit No. 5 covers equipment for horses used on the work, such as horseshoes, horseshoe nails, calks, and clevises. The items allowed, as shown in this exhibit, and which I think are to be considered as coming within the bond, are:
8/28 10# No. 7 horseshoe nails...............$3.00
1 keg No. 4 horseshoes. .12.50
. 1 keg No. 5 horseshoes. .12.50
15# Ño. 4 calks for horseshoes..........2.62
15#- No. 5 calks for horseshoes.......... 2.62
10/12 25# No. 4 calks fox horseshoes..........4.38
12# No. 5 calks for • horseshoes......... 2.10
10/24 5# horseshoe nails.... 1.50
10/19 5# ” ” .... 1.50
25# No. 5 horseshoe ■ calks...............4.38
1 keg horseshoes.......12.50
9/16 12 large clevises......7.20
Total allowed under this heading.....$66.80
*214The remaining items thereof are disallowed, for I do not think that harness, chains, traces, and equipment for horses are proper charges under the bond. These items are as follows:
8/20 6 No. 20 horse collar pads----$ 5.10
6 No. 22 horse collar pads.... 5.10
100 ft. %" rope for horses... 3.25
1 pr. harness lines........... 7.00
6 single trees............... 10.50
9/8 2 doz. 1" harness snaps....... 2.00
9/10 3 pr. Concord harness hames.. 11.25
6 heavy single trees......... 15.00
1 horse collar............... 5.75
100 ft. %" rope for horses... 2.75
9/16 1 pr. 24 ft. harness lines...... 9.00
9/18 8 center clips for single trees.. 2.80
9/28 50# 5/8" rope for horses..... 2.70
2 doz. 1" snaps for harness... 2.00
10/3 2 pr. harness lines........... 17.00
10/5 1 21" horse collar........... 7.50
122" horse collar............ 7.75
10/5 12 sweat pads.......... 10.20
10/24 21# rope.................. 7.35
2 sets harness............... 80.00
6 pr. chain traces............ 13.50
express paid on same........ 10.00
10/19 1 set 24' harness lines........ 9’.00
3 No. 22 horse collar pads.... 2.55
3 No. 24 horse collar pads.... 2.70
■200 ft. %" halter rope....... 6.40
Plaintiff’s Exhibit No. 6 covers camp house equipment, consisting of furnishing a place for lodging of the laborers at the camp, and comes within the holding in the Brogan Case and within the terms of the bond, after deducting a total of $4.95 for one heater, $4, one damper, 20 cents, and three joints stovepipe, 75 cents, which were furnished Russell & Cole, leaving a balance allowed of $458.87.
Plaintiff’s Exhibit No. 7, consisting of 'kitchen and mess hall equipment, comes within the same rule applicable to the items in Exhibit No. 6, and are allowed, excepting the items of 10 cents and 5 cents for forks and four cups, 40 cents, which were furnished to Russell & Cole, leaving a balance allowed $171.57.
Plaintiff’s Exhibit No. 8, consisting of blacksmith coal, axle grease, welding compound, freight on gas and oil, and freight on merchandise used in the prosecution of the work. These items also come within the bond, and freight and haulage charges are also recognized as proper charges in Illinois Surety Co. v. John Davis Co., supra, and therefore should be allowed in the sum of $57.17.
Plaintiff’s Exhibit No. 9 covers miscellaneous tools and equipment, and contains a great variety of items that appear to be facilities for doing the work and not all materials used in the work. I do not think the rule laid down in the Brogan and other cases called to my attention should be extended so as to apply to materials of the character not allowed under the evidence, as they were equipment and facilities for doing the work and could be applied to any other work. It would therefore be unfair to require the surety to pay for those disallowed, and at the same time allow the contractor to retain them to be used or disposed of by him. To so hold would include equipment of every nature.
The items allowed as shown in this exhibit are such as were used and consumed in blacksmithing and in the prosecution of the work, and are as follows:
8/28 1 doz. stone bolts.....$ .10
20# 30 penny nails... 1.40
1 5/8 inch bit.........60
1 y2" bit.............45
1 3/8 inch bit..........40
20# 30 penny spikes.. 1.40
5 doz. bolts for fresno.. 2.60
2# copper rivets...... 1.00
1 pr. blacksmith tongs 1.50
1 grindstone......... 15.00
2 2# blacksmith hammers .............. 5.50
9/8 1 5/8x10 bolt..........10
1 repair link..........15
9/9 50# 1% drill steel.... 10.00
60 ft. 1" drill steel.... 30.60 bolts.................20
9/16 2 bars 5/8x2% for retiring wagon wheels 15.30
1 rasp for horseshoeing .90
13# 3/8 round iron... 1.67
2 bars each l-8/4r-4/8- % in. round iron, 188# ............. 16.92
1 bar 3/8x1% for retiring wagon wheels... 2.25
9/18 7 %# leather........ 4.35
1 counter sink bit......35 •
9/23 18 %xl% fresno blades .35
9/29 2-5 ft. fresno blades... 20.00
20# rivets........... 4.00
1 share for Deere Road plow.............. 10.25
10/2 2 doz. %x4 machine bolts.............. 1.20
2 doz. 3/8x1% bolts.. .60
1 doz. 5/8x4 bolts......60
2 doz. 3/8x2 bolts......60
*2154 doz. 3/8x2 countersink head blow bolts 2.00
10/5 24r-5/8x2 machine bolts 1.40
2 bars 5/8x2 iron.....12.33
10/12 1-%" drill............40
1-3/8" drill...........60
l-%" drill............70
10/20 1 bx bolts.............50
10/24 1 carborundum stone.. .75
10# 8 penny nails.....70
10/19 1 grindstone......... 15.00
% side leath. . .•...... 16.50
6 bx tub rivets........75
1# asst, copper rivets.. .60
130# round iron...... 11.70
14# 3/8 round iron... 1.74
2 doz %xl% machine holts.............. 1.08
2 doz %x2 machine holts.............. 1.15
2 doz 5/8x5 machine bolts.............. 2.35
20# 8 D nails........ 1.40
2 #3 D nails..........16
10/22 1 blacksmith drill.....22.20
9/8 1 160# anvil......... 20.00
1 50# vise........... 10.00
1 railroad plow....... 71.25
9/11 1 shoeing hammer..... 2.00
10/24 2-3% Mitchell skein & Box for broken axle (wagon repairs) ... 11.00
Making a total allowance under this heading of ............ $358.60
The remaining items thereof, disallowed as not being proper charges under the bond, are as follows:
8/22 % doz double bit axes and handles................. $21.00
1 5 ft 2-man saw........... 3.50
1 pr. handles for saw....... 1.25
8/28 6 shovels ................. 12.00
1 doz pick handles.......... 7.20
1 brace................... 4.50
9 RR picks................ 15.75
1 50-ft steel tape........... 2.65
7/31 1-4 tine fork............... 2.00
9/5 1 pr. lineman’s climbers..... 11.00
9/8 12# block wire............ 1.20
6-% cable clamps........... .75
6 RR pick handles.......... 4.50
1 doz D hdl shovels......... 21.00
9/9 1 6 ft. crosscut saw......... 9.50
1 pr handles for saw........ 1.00
1 pr sheep shears........... 3.50
6 DB ax handles........... 5.00
2 sledge hdls............... 1.50
3 D bit axes............... 10.50
2- 2 gal. W bags............ 3.00
1 pr. pincers.............. 2.75
2 12" Mill files............. 1.00
3 pr 1" butts.............. .25
6 RR picks................ 9.00
10/5 1 saw set.................. 1.85
3- 10" mill files............. 1.05
10/12 6-8" mill files.............. 1.50
10/19 75# 1" oet. steel............ 15.00
10/20 1-7# sledge............... 1.75
10/24 1 saw set.................. .50
10/19 1 5% ft. cross cut saw...... 9.00
6 doublebit axes............ 21.00
6 long handle shovels........ 12.00
6 RR picks hdls........... 39.00
1 D 8 saw................. 3.75
194# y2x2y2 steel.......... 17.46
1 pr saw handles........... 1.25
1 hammer.................. 1.50
2 log chains............... 13.00
11/10 1 pr. shears................ .85
1 pocket level...............20
1 saw set.................. 1.50
8/22 2 8" files....................50
8/28 1 6 inch saw file.............20
22# 1-ineh manila rope..... 8.80
8/31 114 inch rasp.............. .65
9/8 1 saw gauge............... 1.00
9/11 3 scrapers................. 67.50
9/14 1 20 A Martin Ditcher....... 112.75
10/3 28# rope 1" for pulling trees 11.20
10/5 3 8-inch files................90
10/24 Postage on above........... 1.50
10/19 3 8-inch flat files........... 1.00
3 12-ineh flat files........... 1.50
100 ft. 1 inch rope for pulling trees ................... 11.20
9/19 100 ft. 3/8 cable for pulling trees ................... 13.00
Plaintiff’s Exhibit No. 10 consists of groceries consumed at the camp for laborers, and are allowable in the sum of $5.
Plaintiff’s Exhibit No. 11 consists of office equipment, such as stationery, clock, pens, and pencils, in the sum of $9.15’, and are not allowable, as these items would have to have been used by the contractor should the work have been done under any other circumstances and at another place.
Plaintiff’s Exhibit No. 12 covers miscellaneous items, consisting of fish lines, pocketknives, rubber boots, watch, shoe tacks, shoe soles, etc., in the sum of $24. It would seem *216no reason is required to be given as to why these items are not allowable, for a contractor is supposed to furnish his own wearing apparel, such as shoes or boots, and also watch and poeketknives, which he uses at all times, and in going fishing to take care of that expense. These items are disallowed.
Intervener recognizes a credit of $100, paid by Craven cheek, in his claim of the balance of $2,805.41.
The' second objection of the defendant surety as to the materials furnished not having been used in the improving of the highway and in the prosecution of the work is that it cannot be determined as to what proportion of the work was done on section 3 under the contract as compared with section 2 not covered by the bond. While there is in evidence no estimates of the engineer on the. work, yet Suheontraetor Nelson testified that there was about 15 per cent, of the work done below station 1002 plus 50, and 85 per cent, above. The 85 per cent, done in section 3 is covered by the bond. I feel that I should accept the testimony of the suheontraetor, and consider it as sufficient as to what proportion of the work was done on work covered by the bond, as it is definite enough, in the absence of any estimate of the engineer in charge. He, as contractor, did the work, and, in the absence of anything definite to the contrary, we must assume that he is able to give the percentage of the work done at the plaee covered by the bond. So there will be deducted from the amount of the materials furnished by intervener, as above allowed, 15 per cent, of such amount, being the amount of the work done in section 2 not covered by the bond, and also the $100 check given by Craven, already credited on the Nelson account, which should be deducted from the 15 per cent., as there were no instructions by Craven given at the time he gave the check as to how it should be credited, and therefore that payment should be credited on the portion of the Craven account not covered by the bond.
In view of the conclusions thus reached, where intervener is allowed the total sum of $2,131.13, plus the sum of $100* to be deducted from the 15 per cent, of the work not done in section 3, making the total sum of $2,231.-13, less the 15 per cent., or $334.67, judgment may he entered for intervener and against the surety company for the balance of $1,896.46, and interest at the rate of 7 per cent, per annum from March 7,1926, to date, and costs. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218885/ | NIELDS, District Judge.
This is an application by a creditor to review an order of sale entered by the referee. Pick Barth Holding Corporation was adjudicated a voluntary bankrupt January 9, 1933. January 21, 1933, Nathaniel Peter Rathvon was appointed trustee by the creditors and qualified by giving bond. March 9, 1933, the trustee filed with the referee a petition setting forth that he had received an offer from Atlas Corporation for all the property and assets of the bankrupt with certain exceptions. March 24, 1933, Katie French, a creditor, filed with the referee her petition praying that the trustee be examined as to his qualifications, so that, in the event the court should ascertain that the trustee had no bona fide office or residence within this district, he be removed and a meeting of creditors called for the election of a new trustee. March 27, 1933, after notice to creditors, the petition of the trustee for an order of sale came on for hearing before the referee. Objection to the acceptance of the offer was made by a small minority of creditors. In addition to various objections, counsel for petitioner questioned the election and qualifications of the trustee. At the conclusion of the hearing on March 27, 1933, the referee approved the offer of Atlas Corporation made to the trustee and entered an order for private sale. A review of this order is sought here.
Section 44 of the Bankruptcy Act (11 USCA § 72) provides: “The creditors of a bankrupt estate shall, at their first meeting after the adjudication ~ * appoint one trustee or three trustees of such estate.” This section gives to creditors the right to elect a trustee. The election should not be set aside unless it clearly appears that some requirement of law has been violated.
Section 45 of the Bankruptcy Act (11 USCA § 73) provides: “Trustees maybe (1) individuals who are respectively competent * * * and reside or have an office in the judicial district within which they are appointed. * * * ”
The trustee is the arm of the court. He is the representative of no creditor or class of creditors. As the title of his office imports, he is trustee for all who have an interest in the estate.
Here the election of the trustee is challenged on two grounds: (1) Because he did not “reside or have an office” in this district at the time of his election, within the meaning of section 45 of the Bankruptcy Act; and (2) because he had been, and at the time of his election as trustee was, an employee of Atlas Corporation, the company offering to purchase the assets, and also the largest creditor of the bankrupt, having an interest of approximately 85 per cent, of the aggregate of the provable liabilities of the bankrupt, other than deferred liabilities. These are serious questions. If it shall appear that the trustee established an office in this district shortly before the filing of the bankruptcy petition to qualify himself for election as trustee, or if it shall appear that he was an employee of the Atlas Corporation and owed his appointment in large part to his employer — the proposed purchaser — it may well be that his election as trustee by the creditors should be disapproved. There is no proof before the court to enable it to pass upon these questions. Counsel for the petitioner requested the referee to defer an order of sale until his application to remove the trustee could be determined. This (request^was not granted. Counsel for the trustee declined to state on the record before the referee whether or not the trustee was an employee of the Atlas Corporation, with the comment, “We are considering the merits and fairness of a proposal for purchase and sale.” These substantial questions should have been passed upon by the referee before taking action on the petition of the trustee for a private sale.
The case will be referred back to the referee, with instructions to permit any party in interest to submit evidence relevant to the questions herein considered and to pass upon the same. The order of sale under review must be vacated and set aside. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218896/ | NETERER, District Judge.
Trial by jury herein was waived, and the court finds that Edward Baker Cady enlisted in the military service of the United States, November 8, 1917, and was honorably discharged June 26, 1919, -and deceased March 12,1925; that while in service a $10,000 contract of war risk term insurance was issued to him, in which Violet Cady, his mother, was made beneficiary for $8,000, Lee Charles Cady, a brother, for $1,000, and Bessie Cady Trussell, a sister, for $1,000. The contract lapsed for nonpayment of premium July 1, 1919. September 18, 1920, the insured reinstated the insurance in the amount of $5,000, and premiums thereon were paid to December, 1921, inclusive. January 2, 1923, he applied for reinstatement of $5,000 and conversion to a 30-payment life policy, naming Katherine E. Cady, his wife, as beneficiary. This was rejected. On May 19,1924, he made application for reinstatement of $10,000; upon which no reference was made to beneficiary or beneficiaries. The application was granted and was in force at his death, March 12, 1925. Thereafter, March 15,1925, the Veterans’ Bureau approved an award in favor of Katherine E. Cady, his widow, in the amount of $28.75 per month, being installments on $5,000 of the insurance. The remaining insurance was distributed in monthly payments to Violet Cady, mother, Lee Charles Cady, brother, and Bessie Cady Trussell, sister, in proportion to the amounts of the original designated beneficiary. The:payments ceased March 31, 1926. The mother died March 31, 1926, and Katherine Cady, as administratrix of the estate of the insured, was paid $3,843, computed value of the remaining unpaid installments of $4,000 insurance, which were payable to Violet Cady during her lifetime.
The plaintiff has waived all claim to payments heretofore made to Violet Cady and to Lee Charles Cady and to Bessie Cady Trussell.
Demand was made by the plaintiff for payment of the remainder of the insurance, but prior to the commencement of this action this payment was denied.
While in service the insured was unmarried. After his discharge he married and there was bom unto him two children, one of whom was suffering from strangulation at birth and is suffering from what is known to the medical profession as Little’s Disease, unable to talk, walk, or move her body, and some of her internal organs have become paralyzed, though her mind is not impaired. The child needs constant nurse’s care and attention.
That the insured believed that his wife was the sole beneficiary under his policy is apparent. The insurance was reinstated as a result determined by research and investigation that his disability was the direct result of his military service and that he was incurable, and at reinstatement he was a patient in the government hospital and discussed the matter of the beneficiary with the Bureau’s contact representative whose duty was to aid, advise, and assist him with relation to the reinstatement, and this representative of the department says that he is satisfied that the deceased wanted and intended his wife to be the beneficiary of the full $10,000 of such policy, and understood that the policy and the papers necessary for such distribution had been made, and that both the deceased and the representative believed that all other and previous designa*264tions had been canceled, and that she was the sole beneficiary of the full policy, and that, with such belief and determination of mind on the part of the deceased and the representative of the Bureau, the policies were issued without further designation of benefieiary; that at the time the “deceased had in mind the fact that one of his children was totally and permanently disabled and in constant need of a mother’s care and that his wife would be unable otherwise, without gift or charity, to properly care for his two infant children.”
There is to me no possible question but that the real wish and purpose of the deceased was that the beneficiary should be his wife and that he and the departmental representative there for the purpose believed that every formal legal requirement had been performed. That this was the belief and conclusion of every one interested in this insurance, I think, is manifest by the record. The only interested parties are the beneficiary, wife, government, and the brother and sister.
The government is interested only in being protected against further claim. It has no right to the money, but must be protected in its payment. The brother and sister, have been personally served with process and by default confess all of the claims made by the widow, and there is no escape from the conclusion that the state of mind of all of the parties was that the widow is the exclusive beneficiary. The disclosure by the record that the designation in fact was not formal cannot be controlling. This court in Claffy v. Forbes, 280 F. 233, 234, said: “The only purpose of the regulations, having relation to change of beneficiary, is to enlarge the right of the insured. * * * ” To which should be added: “And protect the United States.” Form, formality, and legal technicality must give way to common sense and remedial justice when all doubt is removed as to the intent of the deceased, which was understood by all parties to have been formally carried out, and when the purpose of the law has been complied with, by the meeting of the minds of all parties, and a technical formality was inadvertently omitted, there should be no hesitancy in carrying out the expressed wish of such deceased, even though it may now be found a legal formality has been omitted. Remedial justice requires, under the disclosed facts and the record in this ease, that the designation of the widow as beneficiary should obtain. And the conclusion follows that judgment, less amounts paid Violet Cady and Lee Charles Cady and Bessie Cady Trussell, must be for the plaintiff. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218897/ | DAWSON, District Judge.
This is a suit for a refund of income taxes for the year 1919 and the interest thereon, claimed by the plaintiff to have been erroneously exacted by the Commissioner. The facts out of which this case arises are, briefly, as follows:
The plaintiff was organized as a Kentucky corporation in 1913, and subsequent to its incorporation and prior to 1919 it developed and operated a coal mine in Perry county, Ky. Some time prior to the first of 1919; the Kentucky Block Mining Company was organized as a Kentucky corporation. These two corporations, about the first of the year 1919, or shortly prior thereto, agreed upon the terms of a lease of the mine and equipment of the plaintiff to the Kentucky Block Mining Company for a period of five years, with the right in the Kentucky Block Mining Company to purchase from the plaintiff at the end of the lease the mine and its equipment for a stipulated price. By the terms of the lease agreed upon, the plaintiff was to be paid a rental of $42,000 per year.
The minutes of the board of directors of each company show that the terms of the contract of lease were approved by the board of directors of each of the companies, but the contract was never actually signed by the parties. About the first of the year 1919; however, the Kentucky Block Mining Company took possession of the premises and property covered by the lease, and operated the mine until about April 1, 1920, at which time, by mutual agreement of the parties, the property was turned baek to the plaintiff. The Kentucky Block Mining Company, during the time it operated the property, paid the rental at the rate of $42,000 per year, as stipulated in the lease agreement.
During the year 1919 the lessee purchased and laid in the mine at its own expense rails, which cost it $1,478.04, and made repairs and additions to miners’ houses costing $4,648.61, and also purchased and plaeed in the mine,. an electric hauling locomotive, for which it paid the sum of $4,426. The agreement under which the lessee operated contained no provision as to the rights of the parties with reference to these expenditures upon termination of the lease, but, when the lease was surrendered by mutual agreement about April 1,1920, the rails were in position in the mine, and were turned over to the plaintiff, as was the locomotive, without any cost to the plaintiff; and of course the plaintiff got the benefit of the repairs and additions to the minera’ houses, and for this expenditure the lessee was not reimbursed. The lease agreement did not specifically require the lessee to make any of the expenditures referred to, although it did provide that the lessee-should keep in good repair all buildings of every kind located on the leased premises, and to repair and replace worn out, broken, injured, impaired, or lost machinery and parts, and to return the property in as good condition as when received, ordinary wear, etc., excepted.
. The lessee company in its tax return for the year 1919 was allowed by the Commissioner to deduct the cost of the rails, the locomotive, and of the repairs and additions to miners’ houses as an operating expense; but, on a reaudit of the plaintiff’s return, the amount paid by the lessee for these items was treated by the Commissioner as income to the plaintiff, the lessor, and the tax involved in this, ease resulted from this addition to the plaintiff’s reported income for the year 1919.
*268Counsel have spent a great deal of time' in their briefs in discussing whether the expenditure of the items referred to should be treated as operating expense or as a capital expenditure. As I view the ease, however, while this question was one of importance in determining the income of the lessee, it is of no material importance in determining the taxable income of the plaintiff, the lessor. The plaintiff has received the full benefit of each of these expenditures without being out of pocket therefor. The result to the plaintiff has been the same as if so much money had been actually paid over to it by the lessee. The vital question in this case is: When did the property acquired through these expenditures become the property of the plaintiff?
There is no claim, or at least there is no proof, in this ease that the electric locomotive was placed by the lessee upon the property in compliance with the clause of the lease requiring it to replace worn out or damaged machinery. On the contrary, I think the proof clearly establishes that it was in the nature of additional equipment placed upon the property by the lessee for its own benefit. It was the lessee’s property, and, nothing else appearing, it undoubtedly had the right to remove same from the leased premises upon termination of the lease. At no time during the operation of the property by the lessee was this locomotive the property of the plaintiff. According to the record in this ease, it did not become the property of the plaintiff until the lease was terminated by mutual agreement on April 1,1920, and it would not have then become the property of the plaintiff except for the fact, as testified to by the witnesses, that the lessee voluntarily turned same over to the plaintiff.
I therefore hold that the value of this locomotive at the time it was surrendered to the plaintiff was, in effect, that much income’ received by the plaintiff at the time of such surrender. As this took place in.1920, it follows, of course, that its value cannot be treated as income received by the plaintiff in 1919.
I am inclined to the opinion that the carload of rails must be regarded as personal property, even after the rails were laid in the mine, and that, in the absence of an agreement to the contrary, the lessee had a right to remove same upon termination of the lease. Therefore title to these rails did not pass to the plaintiff until the termination of the lease in April, 1920, and then only by virtue of the fact that the lessee voluntarily turned them over to the plaintiff with the rest of the leased premises and property. I do not think the fact that the lessee was operating under a verbal lease, which could be terminated at any time, alters the situation. As the record fails to show any obligation to leave this personal property upon the premises upon termination of the lease, it continued the property of the lessee, and became the property of the plaintiff only through the voluntary act of the lessee upon termination of the lease.
As to the repairs and additions to the houses, it seems to me a different situation is presented. These repairs and additions when made immediately became a part of the realty, in tbe absence of an agreement to the contrary, and the proof fails to show any such agreement. Therefore these additions and repairs inured to the benefit of the plaintiff, lessor, immediately upon being made, and their value to the plaintiff should be charged as income to it for the year 1919. The burden being upon the plaintiff to show that this value in 1919 did not equal the amount spent by lessee therefor, and the Commissioner’s determination in this respect being prima facie correct, I hold that the sum of $4,648.61, spent by the lessee in this respect, must be treated as income received by the plaintiff in 1919.
. A judgment, with finding of facts in line with the views here expressed, may be prepared by counsel and presented for entry. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224452/ | MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, District Judge.
The United States of America and the attorneys general of seventeen states have sued Defendants American Express Company and American Express Travel Related Services Company, Inc. (collectively “Amex”), alleging anti-competitive behavior in violation of Section 1 of the Sherman Antitrust Act. (Am. Compl. (Dkt. 57).) In particular, Plaintiffs allege that Defendants’ so-called “anti-steering” provisions violate Section 1 because they prevent merchants who accept Amex payment cards from steering customers to alternative card brands, such as Visa, MasterCard, or Discover. (Id.) This, they argue, reduces competition for payment card services at the merchant level and enables Amex to charge merchants higher prices for these services than it could in a competitive market. (Id.) On September 26, 2013, Defendants moved for summary judgment on Plaintiffs’ claim. (Not. of Defs. Mot. for Summ. J. (Dkt. 281).) The court DENIES Defendants’ motion for summary judgment because genuine issues of material fact remain in dispute.1
I. FACTS
A. The Credit and Charge Card Industry
There are four major issuers of credit and charge cards2 in the United States: Visa, MasterCard, Amex, and Discover. (Pls. Rule 56.1 Counter-Stmt, of Material Facts in Opp’n to Defs. Mot. in Favor of Summ. J. (“Pls. 56.1”) (Dkt. 296-1) ¶ 287.) Amex first entered the payment card industry in 1958, with a charge card for use at travel and entertainment providers. (Mem. in Supp. of Defs. Mot. for Summ J. *191(“Defs. Mem.”) (Dkt. 282-1) at 5.) Its main competitors at the time were Diners Club and Carte Blanche, which both specialized in the same markét. (Id.)
Meanwhile, banks began to offer payment cards that not only allowed customers to charge items to be paid at the end of the month, but also provided revolving lines of credit. Their efforts eventually created two non-profit joint ventures run by consortiums of banks, Visa and MasterCard. (Defs. Stmt, of Material Undisputed Facts in Supp. of their Mot. for Summ. J. (“Defs. 56.1”) (Dkt. 282-2) ¶ 13.) They were managed by boards of directors elected by the member banks. (Id. ¶ 14.) They also had exclusivity agreements that mandated that banks not issue competitors’ cards, including Amex cards. (Id. ¶¶ 14-15.)
Amex first began offering credit cards in the late 1980s, seeking to challenge the two joint ventures in the general purpose credit and charge card market. (Defs. Mem. at 6.) It was joined in this effort by Discover, which in 1985 was the last entrant into the general purpose credit and charge card market. (Pls. 56.1 ¶ 418.) While Amex positioned itself as a premium brand, Discover sought to grow its network by offering lower fees to merchants. (Id. ¶¶ 418-419.)
Although the exclusivity rules that once governed the banks have now been lifted as the result of a lawsuit, most still issue either Visa or MasterCard credit cards. (Defs. 56.1 ¶¶ 71, 80-81.)
B. How Amex Credit and Charge Cards Work
Although they disagree over its implications, the parties agree that the market for general purpose credit and charge cards is two-sided. Defendants sell their services to both merchants and cardmembers in order to allow these two groups of customers to interact with each other. (Defs. 56.1 ¶¶ 3-9; Pls. 56.1 ¶¶3-9.) This case concerns one side of that market: card acceptance by merchants.
For the majority of their cards, Defendants market and issue credit and charge cards directly to cardmembers. These customers include individuals and businesses. (Expert Report of Ann Schmitt, Ex. 24 to Hamer Decl. (“Schmitt Rep.”) (Dkt. 295-1) ¶ 66-68.) Amex bears the risk of fraud or default, collects payments from customers for the transactions it facilitates, and also collects various fees, such as interest on an unpaid balance and an annual fee. (Schmitt Rep. 162.)
Defendants state that they offer rewards to keep current customers and attract new ones. (Id.) The rewards are redeemable for a wide variety of goods and services, for which Amex then pays. (Defs. 56.1 ¶¶ 170, 175, 188.) They assert that rewards can be significant enough that cardmembers may in fact pay a “negative price” for purchases made with Amex cards. (Id. ¶ 176.) Amex states that it maintains a reserve with which to pay for redemption of these rewards, which typically do not expire. (Id. ¶ 191.) Amex keeps a database of all rewards liabilities and asserts that the database demonstrates that its liabilities increased significantly between 2002 and 2010. (Id. ¶ 202.) Defendants explain that corporate card-members can also receive rebates for their Amex card spending. (Id. ¶ 209-10.)
Defendants also contract with merchants to enable them to accept payment with Amex cards. These contracts dictate all facets of the Amex-merchant relationship, including the manner in which a merchant may display the Amex logo, treatment of Amex cards in relation to other cards of the same or different brand and to other payment methods, and the price of accepting Amex cards. (Schmitt Rep. ¶ 63.)
*192To provide these services to cardmem-bers and merchants, Defendants operate a platform for processing card transactions. Plaintiffs expert explains that processing has three steps: authorization, clearing, and settlement. (Id. ¶ 64.) Authorization happens when a merchant sells a good or service to a customer. In most cases this step takes place electronically — the merchant’s terminal (where customers swipe their cards) sends information about the transaction to Defendants. Defendants then check this information against their customer database and send a response indicating whether they will reimburse the merchant. (Id.) If the payment is approved, the cardmember and merchant complete their transaction, and the merchant uses the terminal to inform Defendants that it has done so. (Id.) Defendants then “clear” their records regarding the transaction and “settle” it by transferring funds to the merchant’s bank account. (Id.) Third-party payment processors provide the hardware that connects Amex and other card providers to merchants. (Id. ¶ 65.)
This model differs from the one used by Visa and MasterCard, which do not issue their own cards. Their cards are instead issued by individual banks, which then become responsible for authorizing transactions, managing billing and credit, and taking on the risk of fraud or default. (Id. ¶ 78.) Defendants also allow banks to issue Amex-branded cards to cardmembers, but this is far less common. (Id. at ¶ 65.)
C. Amex’s Merchant Fees
Defendants charge merchants various fees in exchange for providing payment processing services. These fees include fixed monthly fees, and per-transaction fees that may be composed of a fixed “transaction” fee and a “merchant discount fee.” (Defs. 56.1 ¶¶ 137-38.) Amex’s “merchant discount fee” is equal to the dollar value of the transaction multiplied by a percentage discount rate. (Id. ¶ 134.) Merchants typically pay the same per-transaction price for bank-issued Amex cards as they would for Amex-issued cards. (Id. ¶ 79.) Amex has compared their merchant discount fee to those charged by Visa and MasterCard, adjusting for charge volume and type of card product. (Id. ¶ 153.) With these adjustments, Amex’s average merchant discount fee is 3% greater than MasterCard’s and 8% greater than Visa’s. (Id. ¶ 155.) Plaintiffs agree that Amex is more expensive for merchants to accept — that is a principle element of their suit. (Pls. 56.1 ¶ 155.)
Defendants aver that Amex negotiates directly with merchants, offering incentive payments or fee reductions; Visa and MasterCard do not negotiate these matters. (Defs. 56.1 ¶¶ 145, 147.) Amex offers various concessions to merchants including lower discount fees and exceptions to their anti-steering provisions. (Defs. Mem. at 8-9.) Plaintiffs counter that Amex only negotiates with the largest merchants. (Pls. 56.1 ¶ 145.) They also point out that Amex charges different discount rates to merchants in different industries, a point Defendants do not dispute. (Id. ¶¶ 290-291; Defs. Reply to Pls. Rule 56.1 Counter-Stmt, of Material Facts in Opp’n to Defs. Mot. for Summ. J. (“Defs. Resp. to Pls. 56.1”) (Dkt. 313-2) ¶ 291.)
Defendants state that their higher fees can be explained bécause they have pursued “a differentiated product strategy that focuses upon delivering premium value to both merchants and cardmembers.” (Defs. Mem. at 6.) Because they issue almost all of their own cards, Defendants claim that they are able to collect market data and offer targeted advertising opportunities to merchants. (Id. at 6-7; Defs. *19356.1 ¶¶ 88-96.) These advertising opportunities are designed to help merchants acquire and retain cardmembers as customers. (Defs. Mem. at 6.) Defendants also offer cardmember rewards and benefits that they argue are superior to those of other credit card companies. (Defs. Mem. at 7.) These elements, they contend, lead to higher spending by cardmembers at various merchants. (Id.) Plaintiffs argue that Amex’s capabilities are not unique (Pls. 56.1 ¶ 87) and that existing benefits to merchants provide no justification for the anti-steering rules. (Id. ¶ 89.)
D. Amex’s Anti-Steering Rules
The major credit card companies have a history of using merchant preference campaigns in order to draw business away from competitors. (Defs. 56.1 ¶ 36 (discussing “we prefer Visa” campaign); Pls. 56.1 ¶¶ 36, 349-53 (discussing preference campaigns by Visa, Discover, MasterCard, and Amex).) Partially in response to these campaigns, Amex implemented the anti-steering rules, which limit the ability of merchants to “steer” customers toward the use of another card. (Pls. 56.1 ¶ 358 (citing Dep. of Stephen McCurdy) (Amex VP of strategy for merchant services).)
The challenged rules are contained in section 3.2 of Defendants’ standard Merchant Reference Guide, which is their standard contract with merchants, and state that merchants:
must not:
• indicate or imply that they prefer, directly or indirectly, any Other Payment Products over our Card,
• try to dissuade cardmembers from using the card,
• criticize or mischaraeterize the Card or any of our services or programs,
• try to persuade or prompt Cardmem-bers to use any Other Payment Products or any other method of payment
• impose any restrictions, conditions, disadvantages or fees when the Card is accepted that are not imposed equally on all Other Payment Products, except for electronic funds transfer, cash, and checks,
• engage in activities that harm our business or the American Express Brand (or both), or
• promote any Other Payment Products (except the Merchant’s own private label card that they issue for use solely at their Establishments) more actively than the Merchant promotes our Card[.]
(Defs. 56.1 ¶ 225.) Providing information about cost of acceptance or trying to persuade customers to prefer one non-Amex payment card over another non-Amex card is also prohibited. (Pls. 56.1 ¶¶ 372, 375-378.)
E. Procedural History
Plaintiffs brought suit on October 4, 2010, alleging that Visa, MasterCard, and .Amex’s anti-steering rules violate Section 1 of the Sherman Act. MasterCard and Visa promptly settled on July 20, 2011. (Final J. (Dkt. 143).) Defendants have continued to litigate.
On September 26, 2013, Defendants moved for summary judgment on all of Plaintiffs’ claims. (Not. of Defs. Mot. for Summ. J. (Dkt. 281).) Plaintiffs filed their opposition to Defendants’ motion on December 6, 2013. (Mot. for Leave to Electronically File Under Seal Pls. Mem. of Law in Opp’n to Defs. Mot for Summ. J. (Dkt. 294).) Defendants replied on January 9, 2014. (Reply (Dkt. 308-1).) Plaintiffs asked for, and were granted permission to. file a sur-reply, which they did on February 12, 2014. (Mem. in Opp’n re Not. of Mot. for Summ. J. (Sealed Version *194Dkt. 320) (Public Version Dkt. 321).) On March 19, 2014, the court heard oral arguments on the motion. (Mar. 20, 2014, Min. Entry.)
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56, summary judgment is proper if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The burden to make this showing rests upon the party moving for summary judgment. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). “[T]he court must draw all reasonable inferences in favor of the nonmoving party.” Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000).
A fact is material if its existence or nonexistence “might affect the outcome of the suit under the governing law,” and an issue of fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving, party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “[Sjpecific facts” grounded in testimony or other admissible evidence create a genuine issue. Id. “[Mjere allegations or denials” of the adverse party’s pleadings, id., “assertions that are conclusory,” Patterson v. Cnty. of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir.2004), or “conjeeture[ ] or speculation” from the non-movant, Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir.1996), do not.
Summary judgment must be granted “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In such a situation, “there can be ‘no genuine issue as to any material fact,’ since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Id. at 323, 106 S.Ct. 2548 (citation omitted).
III. DISCUSSION
All parties agree that Amex’s anti-steering rules constitute a vertical agreement between Defendants and participating merchants. To determine whether an alleged vertical restraint on trade violates Section 1 of the Sherman Act, courts use a rule of reason analysis. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885-86, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007). This most searching form of antitrust analysis involves a context-specific inquiry into the relevant market and a defendant’s effect on that market. Plaintiffs have an initial burden of demonstrating that Defendants’ behavior adversely affected competition. See Geneva Pharms. Tech. Corp. v. Barr Labs., Inc., 386 F.3d 485, 506-07 (2d Cir.2004). Should they meet this burden, it would fall to Defendants to demonstrate the pro-competitive effects of the anti-steering rules. If they do so, the burden would then shift back to Plaintiffs to show that any “legitimate competitive benefits” could be had through less restrictive means. Id. at 507 (citing Capital Imaging Assoc., P.C. v. Mohawk Valley Med. Assoc., Inc., 996 F.2d 537, 543 (2d Cir.1993)).
At this stage in the proceedings, both sides emphasize the first prong of the test. Defendants argue that Plaintiffs cannot meet their initial burden because Plaintiffs are required to prove market power in the relevant market, and they cannot do so due to Amex’s low market share. (Defs. Mem. at 1-2.) However, the law of this Circuit is not so rigid. *195Market power is an alternative method by which a plaintiff may establish a Section 1 violation if unable to prove that the challenged conduct has an actual adverse effect on competition. See K.M.B. Warehouse Distrib., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir.1995). Should Plaintiffs attempt to prove their case by showing market power, they also have more modes of proof available to them than simply relying on market share as a determinant. Because material facts related to the actual adverse effects of the anti-steering rules and to Defendants’ market power remain in dispute, summary judgment is inappropriate.
A. The Relevant Market
To determine whether an antitrust violation has occurred the court must first define the scope of the relevant market. This “market is composed of products that have reasonable interchangeability for the purposes for which they are produced— price, use and qualities considered.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956). For the purposes of summary judgment, both Plaintiffs and Defendants agree that the relevant market is the market for “general purpose credit and charge card” services in the United States. (Am. Compl. ¶ 14, 34; Defs. Mem. at 10.)
Plaintiffs also allege the existence of a Travel and Entertainment (“T & E”) sub-market within the market for credit and charge card payment services. Plaintiffs argue that this market is separate because T & E merchants are subject to price discrimination by Amex. (Am. Compl. ¶ 41.) These merchants are less able to refuse to accept Amex payment cards and Defendants accordingly charge them higher discount fees. (Id. ¶ 45.) T & E merchants are said to be less able to refuse because they depend on business travelers for a significant portion of their revenues and business travelers often have to use a specific card in order to obtain reimbursement. (Id. ¶ 48.) Expenditure with Amex cards accounts for 70% of spending on corporate cards. (Id.) Plaintiffs also argue that these merchants are more reliant on credit or charge cards because customers typically make large purchases and often through the internet, and that these merchants are therefore in a particularly poor position if they want to refuse to accept any major brand of card. (Id.) Within the T & E submarket, Amex’s fees are allegedly 12% higher than those of rival networks. (Id. ¶ 68.)
B. Obligation to Prove Market Power
Defendants’ motion for summary judgment is almost entirely predicated on their assertion that Plaintiffs must prove market power in order to make out a Section 1 claim. Market power is the ability to raise price significantly above the competitive level “without losing all of one’s business.” K.M.B. Warehouse, 61 F.3d at 129 (quoting Graphic Prod. Distrib., Inc. v. Itek Corp., 717 F.2d 1560, 1570 (11th Cir.1983)). Defendants argue that, under the Supreme Court’s ruling in Leegin, the rule of reason framework requires Plaintiffs to prove that Defendants have market power in order to establish a Section 1 violation. (Defs. Mem. at 10-11; Reply at 2.) Plaintiffs read Leegin more narrowly, insisting that they may demonstrate a Section 1 violation in two ways: by either (1) proving that Defendants have market power, or (2) proving that the challenged rules have had actual detrimental effects on competition. (Pls. Opp’n at 8; Pls. Sur-Reply Mem. of Law in Further Opp’n to Defs. Mot. for Summ. J. (Dkt. 320) at 8.) In doing so, they rely on the Supreme Court’s formulation in F.T.C. v. Indiana Federation of Dentists, 476 *196U.S. 447, 106 S.Ct. 2009, 90 L.Ed.2d 445 (1986). There, the Court reasoned that “[s]ince the purpose of the inquiries into market definition and market power is to determine whether an arrangement has the potential for genuine adverse effects on competition, proof of actual detrimental effects, such as a reduction of output, can obviate the need for an inquiry into market power, which is but a surrogate for detrimental effects.” Id. at 460-61, 106 S.Ct. 2009.
In Leegin, the Supreme Court held that vertical price restraints were subject to rule-of-reason analysis, overturning earlier precedent that applied a per se rule to resale price maintenance. 551 U.S. at 888-89, 127 S.Ct. 2705. The Court reasoned that not all such restraints harm competition, so they must be evaluated in light of the specific industry and vertical relationship at issue in a given case. Id. at 897-99, 127 S.Ct. 2705. The Court recognized that market power is “a further, significant consideration,” but it stopped short of requiring plaintiffs to prove a defendant’s market power in order to establish liability. Id. at 886-87, 127 S.Ct. 2705.
On remand, the Fifth Circuit went further, holding that “[t]o allege vertical restraint claim sufficiently, a plaintiff must plausibly allege the defendant’s market power.” PSKS, Inc. v. Leegin Creative Leather Prods., Inc., 615 F.3d 412, 418-19 (5th Cir.2010). Even before Leegin, some other Circuits had made market power a virtual requirement in vertical restraint cases. See, e.g., 42nd Parallel N. v. E St. Denim Co., 286 F.3d 401, 404-05 (7th Cir.2002); Assam Drug Co., Inc. v. Miller Brewing Co., Inc., 798 F.2d 311, 315-17 (8th Cir.1986) (collecting cases).
The Second Circuit is not one of them. It has consistently held that market power is not a requirement under the rule of reason if a plaintiff can prove actual adverse effect on competition. See Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 509 (2d Cir.2004) (citing Ind. Fed’n of Dentists, 476 U.S. at 460-66, 106 S.Ct. 2009; K.M.B. Warehouse Distribs., 61 F.3d at 128-29); see also Todd v. Exxon Corp., 275 F.3d 191, 206 (2d Cir.2001) (“In this Circuit, a threshold showing of market share is not a prerequisite for bringing a Section 1 claim.”); Virgin Atl. Airways Ltd. v. British Airways PLC, 257 F.3d 256, 264 (2d Cir.2001); Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 96 (2d Cir.1998). Instead, this Circuit has suggested that actual adverse effect on competition may in some instances demonstrate market power. Todd, 275 F.3d at 206 (then-Judge Sotomayor stating that actual adverse effect “arguably is more direct evidence of market power than calculations of elusive market share figures.”). Even after Leegin, the Second Circuit is not alone in adhering to the Indiana Federation of Dentists formulations. See Jacobs v. Tempur-Pedic Int'l, Inc., 626 F.3d 1327, 1336 (11th Cir.2010) (“Under rule of reason analysis, a plaintiff may show either actual or potential harm to competition.”) (citing Levine v. Cent. Fla. Med. Affiliates, Inc., 72 F.3d 1538, 1551 (11th Cir.1996)); see also Valuepest.com of Charlotte, Inc. v. Bayer Corp., 561 F.3d 282, 287 (4th Cir.2009) (adopting the view that Leegin established a rule-of-reason test for vertical restraints, under which courts should consider market power along with other factors).
The court declines to declare a new rule in this case. Plaintiffs may carry their initial burden by proving actual adverse effects directly and are not limited to establishing market power, as Defendants argue. See Bookhouse of Stuyvesant Plaza, Inc. v. Amazon.com, Inc., No. 13-CV-1111 (JSR), 985 F.Supp.2d 612, 619-20, *1972013 WL 6311202, at *4 (S.D.N.Y. Dec. 5, 2013) (continuing to use two-option framework); Habitat, Ltd. v. Art of Muse, Inc., No. 07-CV-2883 (DRH), 2009 WL 803380, at *5 (E.D.N.Y. Mar. 25, 2009) (same). The question then becomes whether, if the court considers all material facts in the light most favorable to Plaintiffs, they have made a sufficient showing to suggest that they may be able to prove either that the anti-steering rules have actual adverse effect on competition or that Defendants have market power.
C. Actual Adverse Effect
Plaintiffs argue that they will be able to demonstrate actual adverse effect on competition based on Amex’s higher merchant fees (Plis. 56.1 ¶¶ 292-295), and the inability of merchants to influence those fees. Plaintiffs assert that the anti-steering rules leave merchants unable to provide information about the cost of various cards, let alone incentives to use a different card, to customers. This essentially eliminates incentives for the various credit and charge card brands to compete on price to merchants. (Plis. Opp’n at 10.) Plaintiffs cite evidence of the world before the anti-steering rules, when card brands engaged in merchant preference campaigns. They describe a variety of promotions that merchants could use to induce customers to use different payment forms or different brands of payment card. (Pls. 56.1 ¶ 382.) The possibility of benefiting from these promotions, and the fear of being left out, would cause payment card brands to compete for preferential treatment from merchants by lowering their prices. (Pils. Opp’n at 4.) If the credit card companies lower their prices, Plaintiffs argue, merchants may also lower the price of consumer goods. (Id. at 10.)
1. Preference Programs
Plaintiffs point to credit card preference programs that were prevalent in the 1990s, before American Express resorted to tighter restrictions on merchants. (Pls. Opp’n at 5.) For example, Visa used a campaign in which it encouraged merchants to put up signs saying “We Prefer Visa.” (Pls. 56.1 ¶ 345.) In courting merchants for this campaign, Visa highlighted the higher cost of accepting Amex and that company’s slower processing times. (Id. ¶ 346.) Visa’s preference program brought some success and was" soon copied by Discover, which launched a “We Prefer Discover” campaign with Universal Studios. (Id. ¶¶ 345-351.) MasterCard ran a similar campaign with major league baseball teams, the Professional Golfers Association of America, Pinehurst Resorts, and Travelocity. (Id. ¶¶ 352-353.) In response, American Express launched its own preference campaigns, offering a discount fee reduction to some merchants to discourage their participation in others’ campaigns and eventually developed the anti-steering rules. (Id. ¶¶ 354-358.)
Plaintiffs argue that competition among payment card brands through preference campaigns would begin again if these anti-steering rules were lifted. (Id ¶ 359.) In particular, they cite the deposition of MasterCard’s Vice President of Travel and Entertainment Industries, who states that, in the absence of Amex’s anti-steering rules, her company would engage in preference campaigns with merchants. (Id. ¶¶ 359-360.) Plaintiffs also offer various examples of other promotions that merchants could run to direct customers towards using lower cost credit and charge cards, eventually driving down prices across the industry. (Id. ¶ 363.)
Defendants’ primary response to Plaintiffs’ evidence is that it is irrelevant because Plaintiffs lack market power. (E.g., Defs. Resp. to Plis. 56.1 ¶¶ 351-360.) They also generally “dispute Plaintiffs’ conten*198tions regarding the effect of steering on competition.” (Id. ¶ 359.) Defendants note that merchants can already run all sorts of promotions to induce customers to use a payment form other than a credit or charge card, including debit cards. (E.g., id. ¶ 362-363.) Although that argument would be relevant if the market definition in this case included other payment forms, for the purpose of summary judgment, it does not.
2. Value Recapture
In 2005, Defendants started the “value recapture” program, allegedly designed to raise the discount rates paid by merchants. (Pls. Opp’n at 3.) Defendants continued the program until 2011. (Id.) The program targeted specific industries for increased discount rates. (Pls. 56.1 ¶ 510.) Based on their reading of Amex’s internal documents, Plaintiffs assert that Amex sought to control the decline in its discount rate that occurred as Amex moved to alter the “mix” of cardmember “spend,” away from the travel and entertainment industries, which typically tolerate high discount rates to other areas, such as retail, where rates are lower. (Id. ¶ 518.) Plaintiffs allege that between 2006 and 2009, Amex’s “value recapture” program raised the discount rate for merchants representing 65% of its U.S. charge volume, generating an additional $1.3 billion in profit. (Id. ¶ 520.) Further, Plaintiffs note that Defendants scaled back the program after this suit was filed. (Pls. Opp’n at 3.) Defendants respond by arguing the Plaintiffs have taken the wrong approach to calculating the price of Amex’s services to merchants and that Defendants’ calculations show no price increases. (Defs. Mem. at 20-21; Reply at 9.) They also contend that their higher merchant discount rate reflects superior network services. (Defs. Mem. at 6.)
The court finds that Plaintiffs have demonstrated that there is an actual dispute of material fact regarding whether the anti-steering rules have had an actual adverse effect on competition. Even if the court ultimately decides that Amex lacks market power, Plaintiffs’ evidence regarding preference programs and price is relevant to the inquiry because it contributes to the court’s understanding of actual adverse effect.
D. Market Power
Although not required to do so, Plaintiffs assert that they can prove that Amex had and exercised market power in the relevant market. “Market power is the ability: ‘(1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion.’ ” Commercial Data Servers, Inc. v. Int’l Bus. Machs. Corp., 262 F.Supp.2d 50, 73 (S.D.N.Y.2003) (citing AD/SAT, Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216, 227 (2d Cir.1999)). Defendants respond that proof of market power rests on market share in the relevant market, which is far below what would normally be considered necessary to prove market power. (Defs. Mem. at 12.) Plaintiffs counter that market share is not the only indicator of market power, citing the peculiar nature of the credit card industry and the discussions of the Southern District and Second Circuit in a prior case discussing the same market. (Pl. Opp’n at 11); see United States v. Visa U.S.A., Inc., 163 F.Supp.2d 322, 336-38 (S.D.N.Y.2001), modified, 183 F.Supp.2d 613 (S.D.N.Y.2001), aff'd, 344 F.3d 229 (2d Cir.2003).
In that case, the United States sued Visa and MasterCard, arguing that their board structures and rules for issuing banks violated Section 1 of the Sherman Act. After a bench trial, the Southern Dis*199trict concluded that the structures of Visa and MasterCard’s boards did not harm competition. Id. at 378-79. However, the court held that the rules for issuing banks that precluded banks that issued Visa or MasterCard payment cards from issuing cards by any other company violated Section 1. Id. at 379. The court found individual violations on the part of both companies, despite MasterCard having only 26% market share, because market share had to be considered in the context of the significant barriers to entry existing in “a highly concentrated market with only four competitors.” Id. at 341-342. The court also noted that market power could be evidenced by a defendant’s actual conduct, id. at 340, and considered - actual price increases and output restrictions, id. at 340, 342. The court also took into account customer insistence on using certain payment cards, noting that such insistence allowed differential pricing. Id. at 341.
The Second Circuit largely ratified the district court’s approach. It agreed that Visa and MasterCard had market power both jointly and separately, despite MasterCard’s comparatively low market share. See United States v. Visa U.S.A., Inc., 344 F.3d 229, 239 (2d Cir.2003). And it noted, consistent with Todd and K.M.B. Warehouse, that market power can either be demonstrated through specific conduct or presumed if a defendant holds a large enough market share. Id. The court also looked to what it termed “customer preference,” which it agreed could prevent merchants from refusing to accept Visa or MasterCard, even in the face of significant price increases, as well as to evidence of those price increases. Id. at 240.
Defendants correctly point out that the instant case involves accusations of vertical restraints of trade, but Visa was about horizontal restraints. (See Defs. Mem. at 19.) Nevertheless, Visa still provides useful guidance for the limited purpose of understanding how a court might determine market power in this particular two-sided market.
For the purposes of this motion, the basic facts relating to Amex’s market share are not in dispute.3 But the factors that the court may consider relevant to market power extend beyond market share — notably to Plaintiffs’ customer insistence theory and to questions regarding the price of accepting Amex cards. Facts relating to these issues remain in dispute.
1. Insistence
Plaintiffs argue that so-called customer “insistence” amplifies Amex’s market power because it restricts merchant ability to discontinue accepting Amex cards and paying the attendant fees. Amex defines insistence as the percentage of customers who would refuse to shop at a merchant refusing to accept Amex cards. (Pls. 56.1 ¶ 481.) It estimates this number to be 38% of cardmembers. (Id.) Plaintiffs al*200lege that, because merchants are prohibited from negotiating with cardmembers under the anti-steering rules, cardmembers have nearly complete control over how much of Defendants’ service the merchants will purchase. (Pls. 56.1. ¶¶ 484-487.) As a result, they argue, cardmember insistence is an integral component of Defendants’ market power. (Pls. Opp’n at 16.)
Plaintiffs further argue that Defendants recognize the power that insistence gives them in pricing their processing services for merchants. They treat this recognition as evidence that insistence contributes to market power. (Id. at 17.) They point to the deposition of Edward Gilligan, Amex’s Vice-Chairman, who noted that high rates of insistence allowed Amex to charge “a premium discount rate.” (Pls. 56.1 ¶ 484.) Amex’s surveys seeking to quantify customer insistence also form part, of the basis on which it sets its price. (Id. ¶¶ 497(a), 498-499.) Plaintiffs state that Amex emphasizes insistence in its negotiations with merchants and provide specific examples of businesses including large grocery store chains, national pharmacy chains, a cruise line, and major airlines, with whom Amex has used insistence to argue for acceptance of its card and maintenance of its discount rate. (Id. ¶¶ 501-509.) Plaintiffs further allege that Defendants increase insistence by essentially “paying cardmembers to use their cards more” through its rewards programs. (Id. ¶ 489.) Corporate cardmembers are among the most insistent, and so merchants that serve those customers are the least able to negotiate with Amex to reduce their payments. (Id. ¶ 494.)
Defendants counter that “insistence” is, at bottom, merely brand loyalty. Defendants point out that brand loyalty, even of the type that results in undeniably high market share, does not equate to market power. (Defs. Mem. at 14.) Indeed, Defendants maintain that they cannot have market power because they must earn cardmember loyalty by offering better services and rewards. (Defs. Mem. at 15-16.) They also point out that very few consumers carry only Amex cards. (Summ. J. Oral Arg. Tr. 15:16-18, Mar. 19, 2014.) In this vein, Defendants cite United States v. Eastman Kodak, in which the Second Circuit upheld the district court’s ruling that Kodak did not possess market power in the worldwide market for film as a result of strong consumer loyalty. 63 F.3d 95, 108 (2d Cir.1995). Even though customer loyalty gave Kodak a 67% market share in the United States, the Circuit declined to define a more limited, U.S.-only market, even though the U.S. Government contended it had evidence of differential pricing. Id. at 105. Defendants also cite tying cases for the proposition that brand loyalty is not sufficient to establish market power. (Defs. Mem. at 14 (citing Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 90-1547, 1991 WL 149249 (3d Cir. Aug. 9, 1991) on reargument, 959 F.2d 468 (3d Cir.1992); Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d 792, 799 (1st Cir.1988)).) However, these examples have limited applicability to the present case.
As Defendants and Plaintiffs both acknowledge, merchants make the choice to accept Amex cards largely based on what they think their customers will do. (Defs. 56.1 ¶ 5; Pls. 56.1 ¶ 5.) Brand loyalty on behalf of cardmembers is thus relevant to this discussion, but, because it is loyalty on the consumer side of the two-sided market, it proves much less. The Second Circuit’s primary reason for finding that brand loyalty did not translate to market power in Kodak was that consumers were price sensitive, and could easily purchase film from one of the company’s competitors. 63 F.3d at 108. This analysis has limited application here because merchants do not choose *201how much of Amex’s services they purchase, nor, for that matter, do they determine how much they will purchase from Amex’s competitors. (See Pls. 56.1 ¶¶ 323-325; see also Pls. Opp’n at 20 (arguing that one form of competition cannot be substituted for another).)
Although the significance of eardmem-ber insistence is an issue for trial, the court is not convinced that it may be dismissed as merely brand loyalty or that cases involving consumer loyalty in a one-sided market can apply directly to the instant case.
2. Price Increases
Insistence, Plaintiffs argue, allowed Defendants to implement the “value recapture” program of incremental price increases discussed above. (Pls. 56.1 ¶¶ 530-35, 546.) They allege that the success of this program demonstrates Defendants’ market power. (Pls. Opp’n at 3.) However, Plaintiffs and Defendants disagree about how to calculate price in the relevant market. In particular, Defendants argue that two-sided price should take into account expenses associated with rewards offered to consumers. (Defs. Mem. at 20-21; Reply at 9.) Their calculations show a slight decrease, rather than an increase, in price from the early 2000s through 2010 or 2011. (Defs. Mem. at 23-24; Defs. 56.1 ¶ 221.) Defendants assert that their expenses for cardmember rewards increased substantially during the time period covered by the “value recapture” program. (Defs. 56.1 ¶¶ 203-07.) Finally, they argue that Plaintiffs fail to show that Amex charges a higher two-sided price than its competitors. (Id. at 21.) The disagreement between Plaintiffs and Defendants over how to calculate price in this two-sided market raises an issue of material fact- that must be decided at trial.
3. Price Discrimination
Plaintiffs also assert that Defendants’ market power is illustrated by their ability to price discriminate by charging different discount rates to merchants in different industries. (See Pls. 56.1 ¶ 290.) Plaintiffs’ allegations of price discrimination are also integral to the viability of their alleged Travel and Entertainment submarket — which is subject to higher prices purportedly created by especially strong customer insistence in that industry. (Id. ¶ 500.)
However, Defendants sensibly caution that price discrimination does not always demonstrate market power and that the Supreme Court has recognized a shift away from treating price discrimination as evidence of non-competitive market conditions. (Defs. Mem. at 22) (citing Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 44-45, 126 S.Ct. 1281, 164 L.Ed.2d 26 (2006).) One can make a strong argument that in this and other industries with high up-front costs and low marginal costs, such as the airline industry or the software industry, price discrimination can coexist with a high degree of competition. See Ill. Tool Works, 547 U.S. at 45, 126 S.Ct. 1281 (price discrimination occurs in fully competitive markets); William J. Baumol, Daniel G. Swanson, The New Economy and Ubiquitous Competitive Price Discrimination: Identifying Defensible Criteria of Market Power, 70 Antitrust L.J. 661, 674-76, 682-83 (2003). Despite these concerns, the court need not decide now whether or not price discrimination in this instance reflects a lack of competition. This dispute, too, reflects a dispute of material fact to be resolved after trial.
Although market share is an important part of determining whether Defendants have market power, it is not the only component. The court may also consider *202factors such as cardmember insistence, price increases, and price discrimination. Moreover, Plaintiffs allege a possible sub-market in which Defendants would have significant market share. This allegation and issues related to how to characterize insistence, whether Amex raised its prices, and whether price discrimination reflects marker power, are all subject to disputes of fact appropriate for resolution at trial. As a result, summary judgment is inappropriate with regard to Defendants’ market power.
IY. CONCLUSION
For the reasons discussed above, Defendants’ motion for summary judgment is DENIED. Defendant’s reading of Leegin asks the court to go against clearly stated Second Circuit law allowing an antitrust plaintiff the option of proving either actual adverse effect or market power, without any indication from the Supreme Court or Second Circuit that it must do so. The court declines this invitation. The remaining issues, including whether Plaintiffs may ultimately succeed in proving that Defendants’ anti-steering rules have actual adverse effect on competition and whether Defendants have market power, raise questions of material fact. Summary judgment is thus inappropriate.
SO ORDERED.
. This Memorandum and Order refers to sealed entries on the docket and to certain information contained in those entries. To the extent that it makes public any information previously available only under seal, the court considers doing so necessary to explain its reasons for denying Defendants’ motion. The court anticipates that this information will almost certainly become the subject of public testimony at trial.
. Credit cards offer consumers a revolving line of credit. Charge card purchases must be paid at the end of every billing cycle. For the purposes of this motion, all parties have agreed to treat debit cards as belonging to a separate market.
. Plaintiffs note that, in 2012, Amex accounted for 26.4% of general purpose credit and charge card volume. (Plis. 56.1 ¶ 309.) This volume would put it in second place among card issuers, behind Visa, which has 44.1% of purchase volume, and ahead of MasterCard and Discover, with 24% and 5.5% respectively. (Pls. 56.1 ¶ 310.) Amex had similar market share in other recent years, and somewhat lower market share in the early 2000s and mid-to-late 1990s. (Id. ¶¶ 312-313.) For the purposes of this motion, Defendants do not dispute these figures. (Defs. Resp. to Pls. 56.1 ¶¶ 309-313.) The parties also put forward other measures of market share. For instance, Plaintiffs report that Amex cards were accepted by 80% of U.S. merchants in 2010. (Pls. 56.1 ¶317.) But Defendants point out that in 2009, Amex cards were accepted at only 60% as many merchants as accept Visa and MasterCard. (Defs. 56.1 ¶ 24.) Amex also has the smallest number of credit and charge cards in circulation. (Id. ¶ 19.) | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224453/ | MEMORANDUM AND ORDER
WEXLER, District Judge.
Plaintiff Elissa Smith (“Smith”) brings this action against defendants Town of Hempstead (“Town”) and former Town Clerk Mark Bonilla (“Bonilla”), asserting claims for discrimination, sexual harassment, and retaliation under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”), and 42 U.S.C. § 1983, as well as supplemental state law claims under New York State Human Rights Law (“NYSHRL”), N.Y. Exec. Law § 296 et seq., and for intentional infliction of emotional distress, negligent infliction of emotional distress, and assault and battery. The Town moves to dismiss the complaint under Federal Rules of Civil Procedure (“FRCP”) 12(b)(1) and 12(b)(6).
I. BACKGROUND
For purposes of this decision, the allegations of the complaint can be summarized as follows. Smith commenced her employment with the Town on July 18, 2011 as a Community Research Assistant in the Town’s Clerk’s office. From that date until August 16, 2012, Smith worked under Bonilla’s supervision. Within two to three weeks after Smith began employment, Bonilla asked her to accompany him on road trips to events that he was attending. Smith claims that Bonilla made comments and advances of a sexual nature toward her and created an intimidating, hostile, and offensive working environment. Smith alleges, inter alia, that Bonilla inappropriately touched her while they were alone in his car and at various events, and that he made various comments about her looks. Smith claims that when she rebuffed Bonilla’s unwelcome and offensive advances, she was shunned and ignored in the office, depriving her of employment opportunities and ultimately leading her to transfer out of the Clerk’s office. In that respect, on August 16, 2012, Smith interviewed for a position in the Town’s Parks Department. That same day, Smith confirmed to a Town human resources employee and a Town attorney that she had been sexually harassed. Smith was immediately transferred from the Clerk’s office to the Parks Department. Smith claims that although the Town has adopted a sexual harassment policy, it failed to disseminate the policy to her or other employee’s of the Clerk’s office and that she never received sexual harassment training. She further alleges that the Town failed to *204properly train and supervise Bonilla regarding sexual harassment in the workplace.
Smith filed a claim of discrimination with the State Division of Human Rights and the Equal Employment Opportunity Commission. Upon receiving a notice of right to sue, Smith brought this action.
The Town moves to dismiss on the grounds (1) that Smith was a member of an elected official’s personal staff and, as such, is exempt from coverage under Title VII; (2) that Smith fails to state a claim under § 1983; and (3) that, upon dismissal of all federal claims, the Court should dismiss the supplemental state law claims under 28 U.S.C. § 1367(c).
II. DISCUSSION
A. Motion to Dismiss Standard
In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court held that to avoid dismissal a plaintiff is required to plead enough facts “to state a claim for relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955; see also Ashcroft v. Iqbal, 556 U.S. 662, 678-80, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). While heightened factual pleading is not required, Twombly holds that a “formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. On a motion to dismiss, the court must, as always, assume that all allegations in the complaint are true and draw all reasonable inferences in favor of the nonmoving party. Blair v. City of New York, 789 F.Supp.2d 459, 463 (S.D.N.Y.2011). However, the court must ensure that the complaint sets forth “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955; see Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 57 (2d Cir.2010). A pleading that does nothing more than recite the elements of a claim, supported by mere conclusory statements, is insufficient to “unlock the doors of discovery.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Rather, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679, 129 S.Ct. 1937.
“A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). In deciding a FRCP 12(b)(1) motion, the court “may refer to evidence outside the pleadings.” Id. Notably, “[t]he standard for reviewing a [FRCP] 12(b)(1) motion to dismiss is essentially identical to the [FRCP] 12(b)(6) standard,” except that “ ‘[a] plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.’ ” Taylor v. New York State Office for People with Developmental Disabilities, 2014 WL 1202587, slip op. at *3 (N.D.N.Y. Mar. 14, 2014) (quoting Makarova, 201 F.3d at 113).
B. Title VII Claims
The Town argues that Smith was a member of an elected official’s “personal staff’ and, as such, is exempt from coverage under Title VII. See, e.g., Bland v. New York, 263 F.Supp.2d 526, 535-36 (E.D.N.Y.2003) (analyzing personal-staff exemption under Title VII). Smith argues that she does not fall within the Title VII personal-staff exemption. Bonilla also opposes this aspect of the Town’s motion. The parties submit various matter outside of the complaint, including affidavits of town officials, and cite the Court to various local and state laws concerning the Town Clerk position and removal thereunder.
Whether an individual is part of an elected official’s “personal staff’ generally *205involves a “highly factual” inquiry that focuses on the “nature and circumstances of the employment relationship between the complaining individual and the elected official,” an inquiry that “does not lend itself well to disposition by summary judgment.” Teneyuca v. Bexar County, 767 F.2d 148, 151-52 (5th Cir.1985) (internal quotations omitted). In Teneyuca, the Fifth Circuit identified the following non-exhaustive list of factors for determining whether a plaintiff was a member of an elected official’s, personal staff:
(1)whether the elected official has plenary powers of appointment and removal, (2) whether the person in the position at issue is personally accountable to only that elected official, (3) whether the person in the position at issue represents the elected official in the eyes of the public, (4) whether the elected official exercises a considerable amount of control over the position, (5) the level of the position within the organization’s chain of command, and (6) the actual intimacy of the working relationship between the elected official and the person filling the position.
Id. at 151.
There is no dispute that Bonilla is an elected official under Town Law § 20. See N.Y. Town Law § 20 (McKinney 2011). Thus, the parties dispute whether Smith is a member of Bonilla’s “personal staff” for purposes of the Title VII exemption. Upon review of the allegations of the complaint and the various matter submitted by the parties, the Court finds that a determination of whether Smith falls within the personal-staff exemption cannot be determined as a matter of law and should await further factual development. Accordingly, the motion to dismiss the Title VII claims is denied.
C. Section § 1983 Claims
The Town argues that Smith fails to state a claim under § 1983, maintaining, inter alia, that the complaint does not sufficiently allege a custom, policy, or practice of the Town required to impose liability on the Town under § 1983. In response, Smith argues that a custom, policy, or practice may be inferred where “the municipality so failed to train its employees as to display a deliberate indifference to the constitutional rights of those within its jurisdiction.” See Patterson v. County of Oneida, 375 F.3d 206, 226 (2d Cir.2004). She maintains that the complaint sufficiently alleges the Town’s deliberate indifference in that the Town failed to disseminate its sexual' harassment policy to Smith or to employees of the Clerk’s office or to provide sexual harassment training to Smith.
Sexual harassment in the workplace is neither a rare nor unforeseeable event. A municipality’s alleged failure to train employees regarding sexual harassment in the workplace may demonstrate a deliberate indifference to the constitutional rights of those employees. The Court finds that the complaint is sufficient to state a claim that the Town so failed to train Bonilla and its employees in the Clerk’s office regarding sexual harassment in the workplace as to display a deliberate indifference to the constitutional rights of those employees.
The Town also argues that the complaint does not sufficiently state a hostile work environment claim. The Town maintains that Smith does not allege statements or conduct “so offensive” as to alter the conditions of her employment and create a hostile work environment. Smith argues that the allegations are sufficient to state a claim for hostile work environment. See Linder v. City of New York, 263 F.Supp.2d 585, 592 (E.D.N.Y.2003) (“To *206establish such a claim under section 1988, plaintiff must show that 1) she was intentionally harassed, 2) the harassment was based on her sex, 3) such actions were taken under color of state law, and 4) the harassment was so severe as to render the work environment hostile to her.”); Mack v. Port Auth. of New York & New Jersey, 225 F.Supp.2d 376, 384 (S.D.N.Y.2002) (for § 1983 hostile work environment claim against municipality, plaintiff must show that it was policy or custom of municipality to maintain hostile work environment or that municipality had policy or custom of deliberate indifference to existence of hostile work environment). The Court finds that Smith’s allegations are sufficient to state that she was subject to a sexually hostile work environment, particularly given her allegations that Bonilla inappropriately touched her while they were alone in his car and at various events. Such conduct certainly could alter the conditions of her employment and create a hostile work environment.
Accordingly, the motion to dismiss the § 1983 claims against the Town is denied.
D. Supplemental State Law Claims
Given the denial of the Town’s motion to dismiss Smith’s federal claims, the Court denies the request to dismiss the supplemental state law claims under § 1367(c).
III. CONCLUSION
For the above reasons, the Town’s motion to dismiss is denied.
SO ORDERED. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218941/ | GODDARD, District Judge.
Suit by tbe plaintiff, the owner of patent No. 1,326,153 issued to William J. Fleming for shoe buckle support, dated December 23, 1919, and now owned by the plaintiff. The bill, which is in the usual form, asks for an injunction and an accounting.
Plaintiff contends that all of its five claims are infringed by defendants. They read as follows:
“1. A buckle supporting member having two spaced and connected members between’ which the vamp of a slipper may be received to detachably connect the member thereto.
“2. A supporting means for buckles and the like, comprising, a part for attachment to the buckle and a second part in the nature of a clip having two spaced jaws to respectively slip over and under the vamp of a slipper to detachably connect said means thereto.
“3. A supporting means for buckles and the like, comprising, a part for attachment to the buckle and a second part in the nature of a clip having two spaced spring jaws to respectively slip over and under the vamp of a slipper to grip the same and detachably connect said means thereto.
“4. A support for buckles and the like, comprising a member bent baekwardly upon, itself to provide two spaced parts to engage the outer and inner surfaces of the vamp of a slipper or the like, the rear edge of said member and the inner part being curved to substantially fit the instep of the foot, and a part provided on said member to support the buckle.
“5. In combination with a shoe or the like, a buckle supporting member having a part for attachment to the buckle and another part for detachable connection to the shoe, said last named part comprising two relatively closely spaced spring jaws between which the vamp of the shoe is received and gripped to detachably connect said support thereto.”
The defendants’ holders are sold to the trade apart from the buckles or attached as the customer may desire. Plaintiff’s buckle holder comprises a part 10 (referring to patentee’s drawing) for attaching the buckle and a clip portion, part 11, for attachment to the pump. The clip includes two closely spaced jaws between which the vamp of the pump is held. The clip is curved to conform to the instep and curved to conform to the curved edge of the vamp; this formation of the clip tends to hold it in the center of the pump and is of thin metal to avoid discomfiture to the wearer. The jaws of the clip engage the vamp with a spring action, but patentee states “that such spring action although preferred is not necessarily essential for all purposes for the clips, though loosely engaging the vamp, would be held in place by the foot.” The clip is formed from one piece of thin metal, one end of which is bent back upon itself to form the jaws and the other end is bent up between the jaws to afford the support, part 10, which holds the buckle. The jaws, so the patentee states, “are preferably severed to allow independent spring action thereof * * * and to reduce to a minimum the amount of metal to be placed within the shoe.” This buckle holder may be slipped on and off the vamp while the pump is worn, and does not damage the pump.
The defendants’ device consists of a thin piece of metal bent at one end so as to form two spaced jaws which form the clip and the other end bent back to form a support for the buckle to which it is permanently fastened. The clip itself is curved like the plaintiff’s clip to conform to the instep and the curve of the vamp in the pump. On each of the jaws of the defendants’ clip is a small sharp prong.
Defendants admit the use and sale within the statutory period within the Southern District of New York of buckle supports identical with those shown by Plaintiff’s Exhibits 1, 2, 3, and 4, and also that plaintiff had given to the defendants actual notice of the alleged infringement. The defendants set up as defenses the invalidity of plaintiff’s patent, and if valid, that it was not infringed.
In 1919, William J. Fleming was a retail shoe dealer in Northampton, Mass., and finding that many of his customers who bought women’s pumps desired to have an ornamental buckle attached and that this generally meant that one of his employees would have to sew them on for the customer, he discussed the problem with his friend, Mr. Keevers, who was an experienced mechanic, with the view of devising a method of fastening a buckle to the pump without the necessity of stitching it on, and at the same time to provide a fastening device which would permit the buckle to be readily detached from the pump. Subsequently they produced, and on December 23, 1919, obtained, a patent for the device now under consideration and alleged to have been infringed by the defendants. Upon filing their application for the patent, they, Mr. Keevers and Mr. Fleming, became associated and together they borrowed $2,000 from a local bank to be used in manufacturing their device and introducing it among the shoe deal*446ers in New England. Mr. Keevers testified that owing to lack of capital they were compelled to curtail their efforts until the spring of 1925, when their financial resources were rehabilitated, and moreover, at that time, he stated the market was ripe for pushing the invention because of the growing fashion of wearing pumps by women; that during that year they succeeded in introducing their buckle holder to the extent of making gross sales between July and December of over $50,000; that in the latter part of October of that year they learned that the defendants had placed their alleged infringing device on the market, with the result that plaintiff’s gross business dropped from upwards of $50,-000 for six months in 1925, to a little over $27,000 in 1926 and to $18,000 in 1927.
The sole alleged anticipation advanced by the defendants against the patent in suit is a foreign reference — the French patent to Hirth No. 407,819, dated March 11, 1910. It does not appear that the Hirth structure was very generally used. Under the settled rule a foreign patent is to be strictly construed. Seymour v. Osborne, 11 Wall. 516, 20 L. Ed. 33; Westinghouse Air-Brake Co. v. Great Northern R. Co. (C. C. A.) 88 F. 258. In Van Heusen Products, Inc., et al. v. Earl & Wilson et al. (D. C.) 300 F. 922, 930; Judge Learned Hand, when considering the sufficiency of the disclosure of British patents for the purpose of anticipating the Bolton patent, stated: " * * ‘ if it were true that any multiple-ply interwoven fabric made into a collar would, in Bolton’s words, inevitably 'maintain its shape without the employment of starch,’ I should say that Willard’s disclosures were an anticipation, because one had only to practice it as it reads and one would get the present collar. But this is not the truth. Willard had no such purpose in mind, and one might go on forever following his patents, without ever making a starehless stiff collar. True, one might by accident hit upon a properly close weave and interweave, but it would only be by accident. To be a proper anticipation, a reference must go further than that; it must tell you how you can get with certainty the result you are after.”
The Hirth patent consists of two arms hinged to the ends of a crosspiece which arms fold over and fasten together around the bow-knot when the shoe lace is tied forming a clasp to prevent it from becoming untied. On the lower side of this so-called buckle, but more accurately described as clasp, is an arm, f, which is slipped between the lace and the tongue of the shoe or over the top of the tongue so that the foot is protected from contact with the holder by the tongue. The purpose of this "hook £" or arm is obviously not to secure the clasp, or, as described in the Hirth patent, the buckle, but to prevent the bowknot from twisting. In the Hirth patent the clasp or buckle is held on the shoe by its being clasped around the bowknot whieh prevents the clasp from falling off and under the arm, f. Clearly, Hirth’s purpose was to prevent the knot from untying by securing it with this clasp or buckle. The arms of the clasp might, of course, be made ornamental, but that was incidental to Hirth’s main purpose of securing the knot. Hirth’s device was not intended or adapted for fastening a buckle to a pump; its purpose was to secure the knob on a lace shoe so that it would not become untied.
Bearing in mind that the "bouele” referred to in Hirth’s French patent is not a buckle of the nature referred to in the Fleming patent or adapted to support such a buckle, but is a clasp fastening to the shoe lace, it seems to me that Hirth is not an anticipation of any of Fleming’s claims. I do not think that the Hirth patent discloses the idea of the buckle support which Fleming produced, and certainly no one, although the trade was looking for a detachable buckle support, produced anything like plaintiff’s buckle support until it did so in 1919; yet Hirth’s patent had been issued in 1910.
The defendants have cited several references to show the "state of the art”: The patents to Cohen, 1,053,974; Frank, 1,007,084; Keighley, 1,029,371; and Thomas, 1,282,652. These are devices whieh are permanently fastened to the shoe by stapling or sewing, or which require perforation of the shoe. Another group, consisting of patents to Brand, 542,357; British patent to Parsons, 23,684; and British patent to Morgan, 121,629; whieh are fastened on the shoe and are used to secure a knot or the ends of the shoe lace and differ essentially from plaintiff’s device. Other groups consist of Diamond, 397,704; Haskell, 370,382; and Burekhart, 1,079,209. The Diamond patent is for a double hook which forms a trouser support intended to go on the back of the shoe to hold up the lower end of the trousers. The patent to Haskell is a card or label holder; the patent to Burekhart is an index tab. The Thomas and Burekhart patents are cited as references against the Fleming application and were subsequently withdrawn or abandoned as such.
It seems to me that in view of the state of art and in view of the fair amount of com*447mercial success which plaintiff’s device has had, that the rule in Kurtz et al. v. Belle Hat Lining Co. (C. C. A.) 280 F. 277; H. C. White Co. v. Morton E. Converse & Son Co. (C. C. A.) 20 F.(2d) 311, should be invoked in favor of the plaintiff and its patent held to be valid.
The manner of fastening the support to the buckle or whether they be fastened together permanently or temporarily is immaterial in plaintiff’s patent, the patent providing that the buckle may be secured to the support “by any suitable means.” Clearly claims 1, 2, and 4 of plaintiff’s patent read on defendants’ device and are infringed by it. Claims 3 and 5 provide for “spaced spring jaws.” The patent states: “Such action, although preferred, is not necessarily essential for all purposes for the clips even though loosely engaging the vamp would be held in place by the foot, as shown in exaggerated form in Fig. 5, wherein f represents a fragment of a foot in place in a pump p.”
While the jaws of defendants’ device are made of a more pliable metal with a small prong on each jaw, it seems to me that this is merely a colorable change of form, for the defendants’ device performs the same gripping function as that of plaintiff’s and is actually held in place by gripping the vamp and by the foot, as is plaintiff’s, and is a mere mechanical equivalent. “Pressure in a machine may be produced by a spring or by a weight; and where that is so, the one is a mechanical equivalent of the other.” Imhaeuser v. Buerk, 101 U. S. 647, 656, 25 L. Ed. 945. American Roll-Paper Co. v. Weston (C. C.) 45 F. 686; A. Schrader’s Sons, Inc., v. Wein Sales Corporation (C. C. A.) 9 F. (2d) 366. Therefore claims 3 and 5 are infringed, as well as claims 1, 2, and 4.
Accordingly, the plaintiff is entitled to the usual decree providing for an injunction and accounting. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218942/ | PER CURIAM.
This suit is brought by the Missouri Pacific Railroad Company and the Texas & Pacific Railway Company to set aside three orders of the Interstate Commerce Commission dated, respectively, January 12, 1932, March 14,1932, and May 10,1932. The first *450one authorized the defendant the Southern Pacific Company to acquire control of the St. Louis Southwestern Railway Company, known as the Cotton Belt, and hereafter referred to as such, by purchase of its capital stock. The second made the first effective April 13, 1932. These orders were made under section 5 (2) of the Interstate Commerce Act (U. S. C. title 49 and 49 USCA § 5 (2), which empowered the commission to authorize an interstate carrier to acquire the control of another such carrier by the purchase of its stock, if such acquisition will be “in the public interest,” and that “on such terms and conditions as shall be found by the Commission to be just and reasonable in the premises.” The third assigned the Cotton Belt to System No. 16 Southern Pacific instead of to System No. 19 Illinois Central, to which it had been assigned by the Consolidation Plan adopted by the commission December 9, 1929. It was made under section 5(4) of that act (49 USCA § 5(4), which required the commission to adopt a plan for the consolidation of the railway properties of the continental United States into a limited -number of systems. At the time of the application for these orders and the making thereof, the Southern Pacific owned approximately 35 per cent, of the capital ‘stock of the Cotton Belt, preferred and common, of equal voting power, which it began purchasing in 1929. The acquisition of the stock, preferred and common, which it was authorized to purchase would give it approximately 58 per cent, thereof. Jurisdiction of this suit by this court exists because the defendant the Southern Pacific Company is a Kentucky corporation and its principal place of business is in this district.
The relevant railroad situation involved was this: It consisted of two fields of transportation. One extended from St. Louis, Mo., and Memphis, Tenn., on the Mississippi, gateways to and from the East, generally westward to the Pacific Coast. The other from those same gateways, southwardly, to the Rio Grande Valley. The traffic carried in both fields was largely perishable products, vegetables and fruits, produced in Southern California and that valley, and was increasing in volume. In each field there were two routes of transportation — competitive, but more so in the latter. Of the two routes in the' first-named field one may be described as the Southern Pacific, Texas & Pacific, and Missouri Pacific. The Southern Pacific owned and operated a railroad from El Paso, Tex., to the Pacific Coast. Its mileage was extensive and covered the Pacific States consisting of New Mexico, Arizona, California, Oregon, Nevada, and Utah. At El Paso it connected with the Texas & Pacific, which ran east therefrom along the thirty-second north parallel through the northern part of Texas. That company was chartered by Congress in 1871 and was authorized to construct a railroad from Marshall, Tex., to El Paso and thence to San Diego, Cal., along such parallel. Thereafter and whilst it was in the process of constructing its railroad, the Southern Pacific located a line of railroad from Port Yuma, Ariz., on the Colorado river to El Paso on the location of the Texas & Pacific and proceeded to construct it. Thereupon the Texas & Pacific brought suits in the territorial courts of Arizona and New Mexico against the Southern Pacific to enjoin such construction in which receivers were appointed. In 1881 this litigation was settled by a written agreement between Jay Gould, acting on behalf of the Texas & Pacific, and Collis P. Huntington, acting on behalf of the Southern Pacific, termed the Gould-Huntington agreement. It was filed in those suits and final decrees were entered therein embodying its terms. By that agreement it was provided that each of the two railroads should be operated in perpetuity for all purposes of communication, travel, and transportation, so far as the public and government were concerned, as one continuous line and that the Southern Pacific should carry all through business for the Texas & Pacific on as favorable terms as it carried traffic for the Galveston, Harrisburg & San Antonio Railroad Company, whose line extended east from El Paso. Thereafter the construction of each railroad was completed. That of the Texas & Pacific was extended from Marshall its eastern end to Texarkana, Texas-Arkansas. At Texarkana it connected with the Missouri Pacific whose line extended therefrom to Memphis and St. Louis. The latter at some time thereafter acquired control of the former through stock ownership, and ever since there has existed the through route between the Pacific States and those gateways above 'described as the Southern Pacific, Texas & Pacific, and Missouri Pacific. During the year ended June 39, 1939, the Texas & Pacific received from the Southern Pacific at El Paso 551,315 tons of freight, of which 63,999 tons were destined to points on its own line and 487,-336 tons were delivered to connections. Of the total tonnage 388,448 was perishable *451products, of which. 245,519 tons were delivered to the Missouri Pacific and 3,388 to one of its subsidiaries.
The other route in this field may be described as the Southern Pacific, Texas & New Orleans, and Cotton Belt, or, more briefly, the Southern Pacific and Cotton Belt. It came about in this way: The Texas & New Orleans Railroad Company, under leases from the Galveston, Harrisburg & San Antonio and other railroad companies, operated a railroad from a connection -with the Southern Pacific at El Paso, along the course of the Rio Grande for some distance and thence through San Antonio and Houston to New Orleans, and branch roads extending therefrom north to Corsicana, Tex., and Shreveport, La. The Southern Pacific owned its entire capital stock and also the entire capital stock of its lessors, the owners of the railroad covered by the leases. Prior to the construction of the Panama Canal, the Southern Pacific operated a line of steamships between New Orleans and other ports on the Gulf of Mexico, and the North Atlantic ports. The lilies of the-Texas & New Orleans were largely constructed and primarily developed for the handling of traffic between the Pacific and Atlantic Seaboards. With the opening of that canal this route became practically excluded from such traffic. The Texas & New Orleans at Corsicana and Shreveport connected with the Cotton Belt, which owned and operated a railroad through Texas, Louisiana, Arkansas, and Missouri to Memphis and St. Louis. Thus it was that this alternative route was made up of the Southern Pacific, Texas & New Orleans, and Cotton"Belt. By reason of the Southern Pacific’s ownership of the entire capital stock of the Texas & New Orleans and its lessors, their railroad was owned and operated solely for its benefit and it was, so far as the purposes of this ease are concerned, the same as if it actually owned and operated it, so that the route may not inappropriately be described as the Southern Pacific and Cotton Belt.
The Southern Pacific, therefore, had an interest in each of these two routes. It, i. e., its line from El Paso to the Pacific States, was the western end of each route. Because of the larger haul, it had the greater interest in the Southern Pacific and Cotton Belt route. It owned, practically, the entire route from El Paso to Corsicana and Shreveport and 35 per cent, of the route therefrom to the Mississippi gateways. But this route was seriously handicapped by the fact that by Corsicana, the shortest way, it was 266 miles longer than the other route. This handicap was somewhat lessened by an agreement between the Southern Pacific, on the one hand, the Texas & Pacific and Missouri Pacific, on the other, that trains on the two routes should he operated on the same schedules, which caused the slowing up of traffic moving by the shorter route in order that traffic on the longer route might reach Memphis and St. Louis at substantially the same time. The abrogation of that agreement would leave this handicap in full force.
The two routes in the other field of transportation, referred to, may he described as the Texas & New Orleans or Southern Pacific and Cotton Belt, and the Missouri Pacific. The Texas & New Orleans also operated branch roads from its main line in eastern Texas south to the Rio Grande Valley, which, in connection with the branch roads extending north therefrom to Corsicana and Shreveport, heretofore referred to, formed a continuous line of transportation between the connection with the Cotton Belt at those points and that valley. The Texas & New Orleans operated these branch roads under leases from companies whose entire capital stock was also owned by the Southern Pacific. Thus was formed the Texas & New Orleans or Southern Pacific and Cotton Belt route in this field. That of the Missouri Pacific arose from the fact that its lines extended through Eastern Texas and Louisiana to the Rio Grande Valley. The Texas & Pacific had no interest in this route. The competition between these two routes in the nature of things was more severe than between the two routes in the other field. The Cotton Belt formed a part of each route in the two fields competing with the Missouri Pacific. Its interest, as is apparent, was, in each instance, with the route of which it formed a part. It was only through it that it could share in the traffic from and to the Pacific States and the Rio Grande Valley. The result was that the relations between the Southern Pacific and the Cotton Belt were friendly. At the time of the application there had existed for seventeen years a close traffic relationship between them. Practically they were unified. The effect of the granting of the application was to make the nnificktion legal and permanent and render it So that programs of betterment might be planned and carried out. Such a unification would result in a saving on account of terminals of $408,087 for the first year and $338,087 for each year there*452after and enable surplus equipment on each road to be put in use.
There were many interveners in the proceeding before the commission. Those opposing the application were minority stockholders, four short line railroad companies, and five truck lines of which the most urgent were the Texas & Pacific and the Missouri Pacific. Many civil organizations intervened and almost unanimously approved the application. Much evidence on the questions involved was heard. The record covers 1,309 pages. Two commissioners dissented. No objecting interveners complained of the commission’s action except the plaintiffs, really the Missouri Pacific. The commission found that the acquisition by the Southern Pacific of the control of the Cotton Belt by the purchase of its stock would be “in the public interest,” and prescribed as a condition that it “should maintain and keep open all routes and channels of trade via existing gateways unless and until otherwise authorized by the Commission.” In the course of the opinion it said: “The principal benefit to the public will arise from the inclusion of the Cotton Belt as a system with the Texas & New Orleans; such a unification will insure a strong competition for the Missouri Pacific in the Rio Grande Valley and will permit systematic handling of traffic to> and from important Texas points from and to Memphis, St. Louis and points beyond. The Cotton, Belt must depend principally upon bridge traffic for its continued existence and the applicant is best situated and constituted for furnishing such traffic. At the same time the communities served by the Cotton Belt will, under Southern Pacific Control, be assured of a strong transportation system.”
The principal benefit to the public, referred to, was not a single one. It was not merely the insuring a strong competitor for the Missouri Pacific in the Rio Grande Valley, as plaintiffs would have it. It was made up of several items. It permitted systematic handling of traffic to and from important Texas points from and to Memphis and St. Louis and points beyond. It provided the Cotton Belt with bridge traffic necessary to its continued existence by the one best situated and constituted to furnish it. And the communities served by the Cotton Belt would be assured a strong transportation system.
The grounds upon which this court is not empowered to set aside and enjoin an enforcement of an order of the commission are set forth in United States v. BerwindWhite Coal Min. Co., 274 U. S. 564, 580, 47 S. Ct. 727, 733, 71 L. Ed. 1204, in these words: “It is not for courts to weigh the evidence introduced before the Commission, Western Paper Makers’ Chemical Co. v. United States, 271 U. S. 268, 271, 46 S. Ct. 500, 70 L. Ed. 941; or to inquire into the soundness of the reasoning by which its conclusions are reached, Interstate Commerce Commission v. Illinois C. R. R. Co., 215 U. S. 452, 471, 30 S. Ct. 155, 54 L. Ed. 280; Skinner & E. Corp. v. United States, 249 U. S. 557, 562, 39 S. Ct. 375, 63 L. Ed. 772; or to question the wisdom of regulations which it prescribes, United States v. New River Co., 265 U. S. 533, 542, 44 S. Ct. 610, 68 L. Ed. 1165. These are matters left by Congress to the administrative 'tribunal appointed by law and informed by experience.’ Illinois C. R. R. Co. v. Interstate Commerce Commission, 206 U. S. 441, 454, 27 S. Ct. 700, 704 (51 L. Ed. 1128).” It follows that the only ground on which it can so proceed is that the commission has acted arbitrarily in some particular. As to what constitutes arbitrary action, in the case of Baltimore & O. R. Co. v. United States, 264 U. S. 258, 44 S. Ct. 317, 320, 68 L. Ed. 667, it was said: “To refuse to consider evidence introduced or to make' an essential finding without supporting evidence is arbitrary action.” It is likewise arbitrary for it to consider and base its action on facts not introduced in evidence. Interstate Commerce Commission v. L. & N. R. Co., 227 U. S. 90, 33 S. Ct. 185, 57 L. Ed. 431; United States v. Abilene & So. R. Co., 265 U. S. 274, 44 S. Ct. 565, 68 L. Ed. 1016.
The plaintiffs urge five separate grounds as entitling them to the relief which they seek. They mainly rely on the first ground.
1. In their words, it is that the commission “gave no consideration to“but arbitrarily ignored” “the Southern Pacific Texas & Pacific transcontinental route via El Paso,” a “long existing channel of commerce.” Concerning that route they say that it “has its sanction in a public policy inaugurated by Congress in 1866 and presently retained in interstate commerce law” and that “it was designed by Congress and unified by contract and court decrees; and it has functioned in interstate commerce in the public interest for more than fifty years as one continuous line.” Further they say that the effect of the authority granted by the commission to the Southern Pacific Company is “to create and hold under its control a vast transcontinental one line transportation system with its rails *453extending from the West coast via El Paso to Memphis and St. Louis and other Mississippi gateways,” and that it “is designed to and will exclude or eliminate to a substantial extent Texas & Pacific lines and Missouri Pacific lines from participating in the haul via El Paso of interstate traffic originated or controlled by Southern Pacific Company, with irrevocable injury to plaintiffs’ lines of railroad and to the publie interest therein contrary to the intent of Congress and to the Interstate Commerce Act.” As put the arbitrariness complained of consisted in a refusal to consider that portion of plaintiffs’ route made up of the Southern Pacific and Texas & Pacific via El Paso. It is somewhat ambiguous as to just what is meant by the claim that the commission refused to consider this portion thereof. It cannot be said that it refused to consider its existence, or how it came about, or how long it had existed, or how it was operated or how much traffic it handled. The meaning may be that it refused to consider the effect which the purchase by the Southern Pacific of a controlling interest in the Cotton Belt and consequent legal unification of the two would have on such traffic or how the public interest would be affected by the effect which it would have thereon. Their claim is, as above indicated, that it “will exclude or eliminate to a substantial extent” the Texas & Pacific and Missouri Pacific from “participating” in “the interstate traffic originated or controlled by the Southern Pacific” and irrevocably injure them and the public. This, they claim, will be brought about by the Southern Pacific’s solicitation of the shippers of such traffic with whom it comes in direct contact and manipulation of its schedules, which the acquisition of such control will motivate it to bring about. Such will he the case, notwithstanding their route has the advantage 'of being shorter hy 266 miles, and by abrogating the agreement as to schedules heretofore referred to, they will be in position to make the most of it. Seemingly, they think and hold that the practical unification between the Southern Pacific and the Cotton Belt, which had existed for seventeen years, and the spur to the Southern Pacific of the loss of traffic by the opening of the Panama Canal, to make it up through such unification, had no serious effect upon their sharing in such traffic and that in some way a legal unification will. In combatting the position that the principal benefits which the commission found would result from the legal unification in the other field of transportation, as a justification for its action, they contend that it is unnecessary for the reason that such benefits already exist because of the practical unification. It is, therefore, open to say that the claim of plaintiffs that the legal unification authorized “will exclude or eliminate to a substantial extent” plaintiffs from participating in such traffic is not warranted. But it cannot be said that the commission refused to consider the effect of granting the application upon plaintiffs’ participation therein or how the publie interest would be affected thereby. It found expressly that the granting thereof would be in the public interest. It does not follow that because the only benefits to the public arising therefrom which it specified were in the other field of transportation, i. e. between the Rio Grande Valley and the Mississippi gateways, which it said were the “principal benefit,” so arising that the commission thought that the public would not be benefited in the field between the Pacific States and those gateways. It was not necessary that it should so think. That the publie would be benefited in the former field was sufficient justification of itself for its action if there would be no harmful effect in the latter or, it may be said, even if the beneficial effect in the one would overbalance the harmful effect in the other. It is not questioned by plaintiffs that the publie in the former field would be benefited as found by the commission or the substantiality of such benefits. It is clear that it would and that it would may have been a motive for the bringing of this suit so far as the Missouri Pacific was concerned.
Howevei’, the commission did not ignore the effect which the legal unification sought would have upon plaintiffs’ sharing in the traffic originating on the Southern Pacific’s lines west of El Paso, and how the public interest would be affected thereby. It considered these matters as its report shows. In the course of its opinion it said: “During the early stages of this proceeding the applicant declined to give any assurance of retention of existing routes and gateways. Toward the close of the hearing a definite statement was made on rebuttal that the El Paso gateway would remain open. On argument counsel for the applicant stated that in the event of favorable action herein no opposition would be offered to a condition requiring maintenance of existing routes. Such condition will be imposed.” Immediately following this, under the heading of “Publie Interest,” it said: “So far as the Missouri Pacific and the Texas & Pacific are concerned *454the continuance of the El Paso gateway insures adequate protection of their participation in the movement of transcontinental traffic.’* Then the first of three conditions imposed to the granting of the application was in these words: “That the applicant shall maintain and keep open all routes and channels of trade via existing gateways unless and until otherwise authorized by us.” It expressly found that the conditions imposed were “just and reasonable.” Seemingly the danger apprehended was that the 'Southern Pacific might break away from the Texas & Paeifie and Missouri Pacific. To meet this the condition above quoted was imposed. Seemingly there was no apprehension of serious harm to plaintiffs or to the public by granting the application.
We would he justified, therefore, in view of these considerations and plaintiffs’ presentation and elaboration of this ground, in thinking that really their position is not that the commission ignored and arbitrarily refused to consider the effect of the legal unification sought on their sharing in such traffic and how the public interest would be affected thereby, but that what it ignored and so refused to consider was that the Texas & Pacific under and by virtue of the Gould-Huntington agreement and the decrees of the territorial courts entered pursuant thereto had the legal right to have the Southern Pacific refrain from adopting measures to prevent the Texas & Pacific sharing in such traffic to the extent that it would in the absence of such measures and annex as a condition to granting the application that it should so refrain. The plaintiffs urged this position before the commission. In its report the commission said: “On behalf of the Texas & Pacific it is contended * * * that such acquisition of control would adversely affect the status of the Southern Pacific and the Texas & Paeifie under the so called Gould-Huntington agreement.” And again: “Both the Texas & Pacific and the Missouri Pacific insist that the acquisition by the Southern Paeifie of control of the Cotton-Belt would constitute a violation of the Gould-Huntington agreement; that that agreement does not in any way conflict with the provisions of the interstate commerce act, but on the contrary is in the public .interest; and that we should take no action which will affect adversely the long existing status of the Texas & Pacific as a continuation of the Southern Pacific lines.” The response of the commission to this position was in these words: “Any order that we may issue in this proceeding authorizing the acquisition of control as sought must he based upon a finding that snob acquisition of control is in the public interest. It is not within our province to construe the Gould-Huntington agreement or adjudicate the rights of the parties thereunder. The point here at issue is not whether the Gould-Huntington agreement is in the public interest, but whether the acquisition of control as sought is in the public interest. The determination of the status of the parties under that agreement rests with the courts.”
It is, therefore, true to say that the commission did refuse to consider what rights the Texas & Pacific had under this agreement and the court decrees entered pursuant thereto ; and if it was its duty to consider them its refusal to do so may be said to have been arbitrary. Such we take to be the gravamen of this first ground.
It is questionable whether the Texas & Pacific under such agreement and court decrees has the right to have the Southern Pacific refrain from attempting in the way above indicated to divert east-bound traffic originating on its road west of El Paso which without such attempt would go by the Texas & Pacific and Missouri Paeifie route, from such route to the Texas & New Orleans and the Cotton Belt route. By the agreement it was provided “that each of said railroads shall be operated and used by the said companies respectively, their successors and assigns, in perpetuity, for all purposes of communication, travel and transportation so far as the public and government are concerned as one continuous line.” The question to which this provision gives rise is what the operation and use of the two railroads “as one continuous line” involves. Does it involve any more than that the rails of the two railroads should be connected and so kept, that there should be free interchange of traffic between them, and that through trains and joint rates for transportation over the joint route should he maintained? Or does it mean also that neither railroad company was to do anything to divert traffic originating on its line from the railroad of the other? In determining this question possibly two matters should he taken into consideration. One is that there was a provision in the agreement that the Southern Pacific should “carry all through business for the Texas & Pacific on as favorable terms as it carried with the Galveston, Harrisburg & San Antonio Railway Company.” This provision was directed against discrimination on the part of the Southern *455Pacific between the Texas & Pacific and the Galveston, Harrisburg & San Antonio in tbe matter of traffic furnished it by them. There was no provision against discrimination by the Southern Pacific between the two railroads in the matter of traffic furnished by it which would affect the railroad connection which it would take. Possibly at that time there was no room for discrimination which could and would affect the choice between them of such traffic. The other matter is that the verbiage of the provision as to the maintenance of one continuous line is the same as and seems to have been taken from the Railroad. Acts, 12 Stat. 489, 495, July 1, 1862, chap. 120, § 12. Those acts contained an additional provision to the effect- that facilities as to rates, time, and transportation should be without discrimination of any kind in favor of either of the others. By the later Act of June 20, 1874, c. 331, 18 Stat. 111 (45 USCA § 83), it was made an offense for any officer or agent of those companies to refuse to afford and secure to each of said roads equal advantages and facilities as to rates, time, and transportation without any discrimination of any kind in favor of or adverse to any or either of the companies. United States v. Union Pacific R. Co., 226 U. S. 61, 33 S. Ct. 53, 57 L. Ed. 124. The Gould-Huntington agreement contained no such provision.
The plaintiffs base their contention that the commission should have determined what rights the Texas & Pacific had in this particular under this agreement and the effect thereof on the matter before them on these decisions of the Supreme Court of the United States: Texas & Pacific R. Co. v. Interstate Commerce Comm., 162 U. S. 197, 16 S. Ct. 666, 40 L. Ed. 940; Kansas City So. R. Co. v. Interstate Commerce Comm., 252 U. S. 178, 40 S. Ct. 187, 64 L. Ed. 517; Baltimore & O. R. Co. v. United States, 264 U. S. 258, 44 S. Ct. 317, 68 L. Ed. 667; St. Louis & O’Fallon R. Co. v. United States, 279 U. S. 489, 49 S. Ct. 384, 387, 73 L. Ed. 798. In the Texas & Pacific R. Co. Case the commission determined that the part of a joint rate on imported traffic 'received for rail transportation from port of entry to the point of destination being less than the rate on domestic traffic between those points was an unjust discrimination. In so doing it refused to consider the effect of ocean competition on the question. The statute required it to consider whether the'circumstances and conditions of the two rates were substantially similar. It refused to consider such effect because it did not think that ocean competition was a circumstance or condition within the meaning of the statute. The Supreme Court held otherwise and set aside the order complained of. The commission had refused to do that which the statute required it to do. In the Kansas City So. R. Co. Case the commission in acting under the Valuation Act of March 1, 1913 (49 USCA § 19a), had refused to consider evidence as to the present eost of condemnation and damages or of purchase of the land, rights of way, and terminals of that railway company in excess of their original eost or -present value apart from improvements, which the statute required it to consider. This it did on the ground that it was impossible or difficult to perform that duty. The Supreme Court held that its valuation should be set aside. In the St. Louis & O’Fallon R. Co. Case the commission, in determining the value of the property of that company for the purpose of recapture of excess income under section 15a of the Interstate Commerce Act (49 USCA § 15a) refused to consider the present cost of construction or reproduction. The statute required the commission to give consideration to all the elements of value recognized by the law of the land. The Supreme Court held that such present eost was an element of valuation so recognized and set aside the valuation of the commission because of its refusal to consider it. The court said: “This is an express command; and the carrier has clear right to demand compliance therewith,” In each of these three cases the commission had refused to perform a duty expressly imposed on it by the statute. Here it is not open to say that the commission in refusing to consider what rights the Texas & Pacific had under the agreement and those court decrees refused to perform any duty prescribed by statute. What it did was to refuse to consider the private rights of that - company thereunder. The sole question which the statute referred to the commission in disposing of such an application as was before it was whether the granting of it was in the public interest. Possibly it may be said that the public has an interest in a party standing up to his contract and obeying a court decree. But it is not such public interest that the statute had in mind.
In the Baltimore & Ohio R. Co. Case no refusal to consider on the part of the commission was involved. The Supreme Court did not hold that its action should be set aside because thereof. It so held on the ground that there was no evidence justifying *456its .action. The order challenged was one permitting the New York Central Railway Company to require the capital stock of the Chicago River & Indiana Railroad Company, a terminal railroad within the Chicago switching district, and the Chicago Junction Railway Company, another such terminal, to lease its railroad to the Chicago & Indiana Railroad Company. The bill attacking the order charged in clear and definite terms that the finding of the commission that the acquisition and control of such companies would be in the public interest was wholly unsupported by evidence and hence was arbitrary. This fact was admitted by the motion to dismiss the bill on which the ease came up for consideration. It is obvious, therefore, that this decision has no pertinency here.
This consideration given to the decisions of the Supreme Court relied on by plaintiffs makes clear that they do not support their position to any extent. On the other hand, there is a line of recent decisions thereof which make it clear that the commission has nothing to do with private rights. They are those in the following cases: Cleveland, C., C. & St. L. R. Co. v. United States, 275 U. S. 404, 48 S. Ct. 189, 193, 72 L. Ed. 338; Pittsburgh & West Va. R. Co. v. United States, 281 U. S. 479, 50 S. Ct. 378, 74 L. Ed. 980; Claiborne-Annapolis Ferry Co. v. United States, 285 U. S. 382, 52 S. Ct. 440, 443, 76 L. Ed. 808. In the Cleveland, C., C. & St. L. R. Co. Case an order of the commission requiring the plaintiff to make a switch connection with a side track of a coal company under paragraph 9 of section 1 of the Interstate Commerce Act (49 USCA § 1(9) was attacked by it. It urged against the order that the coal company had no power to construct the side track. It was held that the commission had no power to consider this question. The court said: “Congress obviously did not impose upon the Interstate Commerce Commission the duty of determining, before issuing- an order, whether or not a private track actually in existence had been constructed by the shipper ultra vires. Whether in so acting the shipper transgressed powers conferred upon it by the state is a question which cannot be raised in this suit. If the state concludes to question the legality of the shipper’s acts, it must do so in a direct proceeding instituted by it for that purpose.” In the Pittsburgh & West Virginia R.. Co. Case, an order made by the commission on application of a railroad company to abandon its station in Cleveland, Ohio, and use instead the facilities of a union terminal, under power granted it by the commission, was attacked by a minority stockholder .on the ground that the directors who made the application were illegally elected, had been faithless to their trust -and had not first obtained the consent of the stockholders, and hence legally had no authority to make the application or carry out the order. It was held that such was not a proper ground for attacking the order. In the ClaibomeAnnapolis Ferry Company Case an order of the commission granting to a railroad company a certificate of public necessity and convenience to operate a ferry was attacked by an existing ferry company. -One of the grounds of attack was that the railroad company did not have corporate power to operate the ferry. It was held that the order was not subject to attack on this ground. The court said: “Whether the railway company has corporate power to operate the proposed ferry is a question which cannot be considered in this proceeding. We think Congress never intended to impose upon the Interstate Commerce Commission the duty of determining matters of this nature before granting or withholding assent to the construction of an extension.” In accordance with these decisions is that in New York Central Securities Corp. v. United States (D. C.) 54 F.(2d) 122, 130. There the commission had made an order authorizing the railroad company to acquire control of another railroad company by leasing. This order was attacked on the ground that the latter company had no power to make the lease. The court said: “The attack based upon the state law limitation of the corporate power has no proper place in a suit to annul the order.” This decision was affirmed by the Supreme Court, New York Central Securities Corp. v. United States, 287 U. S. 12, 53 S. Ct. 45, 77 L. Ed. 138. These eases establish not only that the Interstate Commerce Commission, in determining whether it will exercise a power conferred or perform a duty imposed upon it, has no power to take into consideration collateral matters, such as private rights, but also that the courts in an attack made upon its order have no power to consider same. The sole question is whether the commission was empowered or required to make the order and had considered the conditions upon which, it was empowered and required to make it and determined that they existed. Indeed, the matter can be pushed further. Even if it were conceded that the Texas & Pacific had rights under the Gould-Huntington agreement which the acquisition of control of the Cot*457ton Belt by tbe Southern Pacific might result in the violation thereof, the commission had power to make the orders complained of upon its determination that the public interest called for such acquisition. Louisville & N. R. Co. v. Mottley, 219 U. S. 467, 31 S. Ct. 265, 55 L. Ed. 297, 34 L. R. A. (N. S.) 671; Kansas City So. R. Co. v. United States, 231 U. S. 423, 34 S. Ct. 125, 58 L. Ed. 296, 52 L. R. A. (N. S.) 1; New York v. United States, 257 U. S. 591, 42 S. Ct. 239, 66 L. Ed. 385.
Our conclusion, therefore, is that this ground of attack is not well taken.
2. The second ground assumes that the orders complained of rest upon a finding that the particular in which unification will be in the public interest is that it will insure a strong competitor with the Missouri Pacific for the movement of the north and south traffic from and to the Eio Grande Valley. The ground is twofold. It is that such finding is contradicted by the recorded admissions of the Southern Pacific official witnesses. It is not that the finding is not supported by any evidence, merely that it is so contradicted. The other part of the ground is that the Southern Pacific does not participate in such movement. The assumption made is not correct. The public benefit was not limited to the north and south field of transportation. The finding was that the principal benefit was to be found there. This implies that the public would be benefited also in the other or east and west field, at least in connection with this general finding that the unification sought was in the public interest. But, as heretofore said, it was not essential that any public benefit should arise from the unification in that field. The benefit arising in the north and south field was sufficient in itself to justify the unification, at least unless such benefit was overbalanced by the harm done to the public in the other field. Nor was the benefit to the public in that field confined to insuring a strong competitor to the Missouri Pacific for the traffic moving from and to the Rio Grande Valley. The finding was that the public would be benefited also in the other three particulars heretofore set forth. The contradiction relied on is rather a strange one. It is not that'the public will not be so benefited. It is not questioned— it is conceded — that it will be so benefited. The contradiction is with the Southern Pacific’s claim and the commission’s finding that the legal unification sought will confer such benefits. It .will not do so because, according to the admissions referred to, thé public was already in receipt of such benefits through the practical unification which had been in existence for seventeen years. The point comes to this, that there should be no legal unification because of such practical unification. But the fact that such practical unification has proven beneficial in this field is reason for its being made legal, rather than otherwise. It thereby insures the permanent continuance of such benefits, and the lessening of the expenses of such operation.
The position that the Southern Pacific had no right to make the application because it did not participate in the traffic from and to the Bio Grande Valley has in view the fact that it did not actually operate the railroad connecting the Cotton Belt with that valley. It was so operated by the Texas & New Orleans. We fail to see any good reason in this why the Southern Pacific should not make the application. The Texas & New Orleans was to all intents and purposes the Southern Pacific. Through the Texas & New Orleans the Southern Pacific had in reality extended itself to the Cotton Belt, and by the acquisition of a controlling interest in the capital stock of the Cotton Belt it would further extend itself to Memphis and St. Louis. Thereby it would bring the Cotton Belt, as well as the Texas & New Orleans, into its system.
3. The third ground is also founded on an assumption. The assumption is that the commission was influenced in its reports and orders were brought about by unwarranted representations made in the course of the proceedings that the Cotton Belt was in financial peril and a receivership would result if the authority sought by the Southern Paeifie were denied. The representations relied on came about in this way: The examiner, to whom the application had been referred, reported against it. He said that “the record is singularly weak from the standpoint of a showing of public interest”; that “it is apparent that no specific benefit to the public can be shown”; and that “the plan may work to the distinct detriment of the public is feared by-the intervenors.” This they’ say put the applicant in a state of panic. Something desperate had to he done°to meet the situation. It was met hy the Cotton Belt filing exceptions to the report and in those exceptions making the representations relied on:-'. They were that the Cotton Belt was “in desperate plight”; that it was “doomed and' that quickly”; and that “unless the .Cotton Belt is consolidated with the Southern Pa^cifie lines it must be treated in the language *458of Prof. Ripley as a membrium dis j ectum— a candidate for the junk pile.” These representations were effective. If it had not been for them the report of the examiner wo-uld have been confirmed and the application denied. The ground for granting plaintiffs the relief they seek founded on this assumption is manifold. The Cotton Belt alone had a right to make a point of this and it had not intervened. The Southern Pacific, the applicant, had not pleaded the existence of such a condition of things as a reason for granting its application. There was no substantial evidence supporting these representations. They were unwarranted. And no opportunity was afforded plaintiffs to show that such a condition of things did not exist. Possibly this ground presents a ease of arbitrariness. The decision in Interstate Commerce Commission v. L. & N. R. Co. and United States v. Abilene & Southern R. Co., supra, are thought to be pertinent here.
The assumption on which this contention is based is not correct. Possibly the dire representations as to the Cotton Belt’s financial condition were not fully warranted. Its exact financial condition was shown by the evidence. It consisted of copies of its income account for the five calendar years preceding the application and for the months of the current years, its latest profit and loss account, and its balance sheet. In addition, its financial history from 1920 down through October, 1930, was given. According to this evidence It had maturing June 1, 1932, $20,720,750 of consolidated mortgage 4 per cent, bonds and a floating debt of $9,262,478.65. Its earnings had gradually decreased until they showed a deficit of $115,390.68 for the first ten months of 1930. In the five months from April 30, 1930, to September 30, 1930, its current liabilities had increased from $6,476,010.90' to the above-stated sum. In the same period its demand loans and bills payable had increased from two and a half million to six million dollars. Such was its financial condition in a time of great financial depression. It was such as to possibly warrant a claim that it was in financial peril and that a receivership was ahead of it unless it could get financial assistance from some quarter. We do not understand plaintiffs to contend otherwise. What they contend was unwarranted in the representations was that the Cotton Belt was dependent on the Southern Pacific for such assistance. It had other resources, the nature of which they set forth in connection with their fourth ground yet to be considered, when reference will be made to them. Taking such to be their contention it is not true to say that, if it had not been for this harangue, the examiner’s report would have been approved and the application denied. On the other hand, it is open to say that the commission was to no extent affected thereby. There is an entire absence of anything to justify such contention. What is relied on by plaintiffs as justifying this is a colloquy in the course of the hearing between one of the majority commissioners and a representative of the applicant and certain statements in the opinions of the dissenting commissioners. In the course of that colloquy the question was put by the commissioner to such representative: “Is there only one reason left, isn’t there, and that is the salvation of the Cotton Belt from a public standpoint?” To which he responded: “No, indeed.” The question was repeated: “Then the only public reason why we should give you the Cotton Belt would be the salvation alone of the Cotton Belt?” The response to which was, “No,” followed by the commissioner’s query, “Isn’t that all that is left?” One of the dissenting commissioners said-: “The most persuasive argument in favor of such a unification is that it will afford a haven of refuge for the Cotten Belt in a time of imminent financial peril.” The other said: “The need for adding strength to the Cotton Belt is given as another reason for approving this acquisition. It is probably true that at the present time the Cotton Belt needs help but a study of its income account, which appears in this record, is quite persuasive that the present condition of the Cotton Belt is due to a considerable extent to matters within its own control or that of the applicant.” These items do not justify the plaintiffs’ assumption. The ground of the commission’s action is fully set forth in its report. It made no statement therein as to the Cotton Belt being in need of the Southern Pacific’s assistance to rescue it from such financial peril as it may have been in. It expressly based its action on its general finding that it was in the public interest that the application be granted, which finding it stated was made in the light of and upon the facts presented in its report. It specified therein the principal benefit arising therefrom, heretofore referred to. No mention was there made of the fact that the Cotton Belt was in financial peril or that it was dependent on the Southern Pacific to be rescued therefrom. Beyond question it was a feature of the case that the Cotton Belt was in need of financial assistance *459and that the Southern Pacific was in position to render it. This feature must have been considered by the commission in determining what action it would take. The rendering of such assistance would insure the public benefit which it specified would arise from the unification sought.
In so far as the Cotton Belt’s need of financial assistance was an element of the ease and proper to be considered it was not essential for the Cotton Belt to bring it forward. The Southern Pacific had the right to present it and certain general statements in its application were sufficient to cover it. The plaintiffs quote the order of the commission governing an application like the one involved here. It is in these words: “The section and paragraph of the act under which the application is made and the nature of the application, that is whether the proposed acquisition of control is to be by lease, purchase of stock or otherwise and briefly the reasons which the applicant has to show that such acquisition will be in the public’s interest (full details and particulars to be reserved for the hearing).” The Southern Pacific’s application measured up to this order in this particular. It alleged that granting the relief sought would “open the way for clearer co-operation between the two systems and the better enable them to meet economically the convenience of the public,” that it would result in “a relative intensity of usefulness of the carriers involved,” and that thereby “competition will be preserved”, and “long established routes and channels of trade and commerce would be maintained.” These allegations necessarily covered that the Cotton Belt would be financially strengthened by the unification sought. It may be that there was no substantial evidence that the needed financial assistance could not be obtained from any other source than the Southern Pacific and an opportunity was not afforded to plaintiffs to show that there were other sources. It was unimportant that there were other sources. Even if there were, it was not improper that the Southern Pacific should furnish it. Indeed, in view of the considerations making for the unification it was the logical party to do so.
This ground of relief must, therefore, be. held to be insufficient.
4. The fourth ground is substantially the same as the preceding one. After the making of the commission’s order of January 12,1932, the plaintiffs, on February 5, 1932, filed a petition for reconsideration and further hearing. One of the matters as to which they sought this was as to whether the Southern. Pacific was the only source to which the Cotton Belt could look for financial assistance. They set up that there were several sources other than the Southern Pacific from which it might obtain financial aid. They were a 10 per cent, reduction in wages of union employees effective February 1, 1932; the Railroad Credit Corporation organized in January, 1932, to administer in aid of carriers by railroad the emergency fund growing out of the increase in rates on commodities and classes of traffic authorized by the commission in the Fifteen Per Cent. Case (Ex parte No. 103), 178 I. C. C. 539; and the Reconstruction Finance Corporation created January 22, 1932, and endowed with $500,000,000 to provide emergency refinancing facilities to aid the railroads in meeting their obligations. Shortly after the filing of such petition the latter corporation made a loan to the Cotton Belt of $18,000,000 to enable it to care for maturing indebtedness conditioned, however, on the Southern Pacific guaranteeing its repayment, principal and interest, which it did. It was further urged that the Southern Pacific was so interested in the Cotton Belt by the ownership of 35 per cent, of its capital stock and its having obligated itself to purchase an additional 23 per cent, that it would not permit the Cotton Belt to default on its obligation and suffer the loss of its investment through a receivership. It is claimed by plaintiffs that this ease comes within the principles applied in that of Atchison, T. & S. F. R. Co. v. United States, 284 U. S. 248, 52 S. Ct. 146, 76 L. Ed. 273. There the Supreme Court held that an order of the Interstate Commerce Commission should be set aside because it denied a. petition for rehearing. The proceeding before the commission involved the entire rate structure of the railroads of the United States. The original hearing had been concluded in 1928, but the order of the commission was not made until July 1, 1930, to go into effect October 1, 1930. The ground upon which a rehearing was sought was that conditions had changed since 1928 and the rate structure should be based on the then conditions of things and not on those of 1928. The Supreme Court held that the petition was more than for a rehearing. It was-a supplemental petition setting up facts which if true required a change in the order. The only particular in which this ease is like that is in the fact that after the granting of the application January 12, 1932, the Cotton Belt received relief from the Reconstruction Finance Corporation. But that the Cot*460ton Belt was not dependent on the Southern Pacific for the financial relief which it needed was not against the granting of the application. Though the Cotton Belt may have had other resources, the Southern Pacific was the logical party to furnish the relief. That really it was the only resource is indicated hy the fact that in order to get the loan from the Reconstruction Finance Corporation the Southern Pacific had to guarantee it. The other two resources which plaintiffs naively-suggest were available do not appeal to one as having any substance. That the Southern Pacific would come to the rescue though the application were denied favored its granting. Then, as heretofore stated, there is no room to claim that the application was granted in order to save the Cotton Belt, and that it would not have been granted had the Cotton Belt not needed salvation. Everything points the other way. It seems that whatever may have been the Cotton Belt’s financial condition, the situation was such as to call for the unification.-
This ground thus meets the fate of the others.
5. The final ground also has to do with the denial of the petition for rehearing. Another matter set forth therein for granting the petition was that the commission should attach certain conditions to the granting of the application other than those which it had prescribed and should make a certain finding. The refusal so to do they urge entitled them to the relief which they seek. The finding which they requested was that the Southern Pacific, Texas & Pacific, -and Missouri Pacific “has functioned in interstate commerce for more than fifty years and the publie interest requires that this through route and connected channel of commerce shall be maintained and free and undisturbed flow of traffic over it shall be fully protected.” The commission did impliedly find, as shown by the first condition which it attached to granting the application, that the public interest did require that this route should be maintained, and kept open. The finding sought may be said to go beyond such finding, in that it was to the effect “that free and unobstructed flow over it shall be fully protected.” The protection had in mind was provided by the conditions which they requested to be prescribed. They were four in number. The first was that such route “shall be operated and used in perpetuity for all the purposes of commercial travel and transportation so far as the publie and' government are concerned as one continuous line.” This is in substance the same as the first condition prescribed by the commission. It adopts the language of the Gould-Huntington agreement. The other three conditions assume that the provisions that this route be operated and used “as one continuous line” did not cover them. The second was that the Southern Pacific with plaintiffs should “maintain on such route as parts of one continuous line, through passenger, mail, express, freight and other train service and schedules including perishable freight service and schedules equal in every respect to those afforded to its other connections, ineluding its own lines and the lines of its subsidiaries * * * East of El Paso,” and “shall not discriminate as to time or service or otherwise against plaintiffs in favor of any other connection or in favor of its own line or lines of its subsidiaries * * * East of El Paso, including the Texas & New Orleans Railroad Company.” The third was that the Southern Pacific in co-operation and connection with plaintiffs should provide “for the publication and maintenance of through rates, rulings and regulations applicable to traffic moving between all points West of El Paso and all points East thereof no higher or less favorable than contemporaneously are maintained between the same points via any other of its connections including its own line and the lines of its subsidiaries * * * East of El Paso including the Texas & New Orleans Railroad.” And the fourth was that the Southern Pacific should not “directly or indirectly, itself or through its subsidiary * *•' * so solicit traffic as to prejudice” the Southern Pacific, Texas & Pacific, and Missouri Pacific route. Some of the terms of these three conditions are possibly covered by the first condition prescribed by the commission, but it may be conceded and the ease disposed of on the idea that they go beyond it.
The statute provides that if the commission, finds that it is in the publie interest for one carrier to acquire control of another it may authorize it to do so “under such terms and conditions” as it shall find to be “just and reasonable.” It is not that it -shall grant such authority upon such terms and conditions as are just and reasonable but “as shall be found” by it to be so, though possibly the two expressions mean the same thing. The question of whether the acquisition of such-control is in the public interest and what terms and conditions are just and reasonable to be attached to authorize such acquisition are both submitted to the determinati&n of the commission, the latter as well as the *461former. Its action in the latter particular as well as in the former must not be arbitrary. In the case of United States v. Chicago, M. & St. P. & P. R. Co., 282 U. S. 311, 51 S. Ct. 159, 75 L. Ed. 359, the Supreme Court held that a condition under another provision of the Transportation Act of 1920 (41 Stat. 456) authorizing the commission to impose conditions was arbitrary and invalid. This it so did on the ground that the condition did not relate to interstate commerce and hence the commission did not have power to impose it. In the case of Atlantic Coast Line R. Co. v. United States, 284 U. S. 288, 52 S. Ct. 171, 76 L. Ed. 298, the validity of a condition prescribed under the statute involved here, substantially similar, though broader than the first condition prescribed here, was held to be valid. In each of these two cases the validity of a condition prescribed was involved. In the one it was held to be invalid, and in the other the holding was that it was valid. No ease has arisen, so far as we know, involving the question as to whether the refusal of the commission to attach a certain condition to granting authority to one carrier to acquire control of another was arbitrary, and hence its action in granting such authority was invalid. Possibly a refusal to attach a condition that is just and reasonable would be arbitrary, and we will so treat it. What the commission was asked to do was in substance to grant the application only on condition that the Southern Pacific should not discriminate against plaintiffs in favor of its subsidiary the Texas & New Orleans and the Cotton Belt as to eastbound traffic. It is sufficient for us to say that we are not justified in holding that its refusal so to do was unjust or unreasonable or arbitrary. We would not be justified in holding that it was unwise. Seemingly the effort in plaintiffs’ part was to have the commission make good what was lacking in the Gould-Huntington agreement. The much greater length of the route by the Texas & New Orleans find Cotton Belt than of that by the Texas & Pacific and Missouri Pacific was a serious handicap to the former in the competition for east-bound traffic. Though the relations between the Southern Pacific and Texas & New Orleans, on the one hand, .and the Cotton Belt, on the other, had been friendly for seventeen years and during all that time it had been to the interest of the Southern Pacific to have traffic originating on its line take the southern and longer route, it does not appear that plaintiffs ever complained of any discrimination by the Southern Pacific in favor of that route, or that it had so discriminated, or that such discrimination, if there had been any, had seriously affected the traffic handled by plaintiffs. On the other hand, it appeared that the traffic so handled had grown, particularly after plaintiffs increased its equipment and efficiency, and this, notwithstanding the agreement between them and the Southern Pacific as to schedules heretofore referred to. Possibly it was fair to the Southern Pacific that its subsidiary should get more of the east-bound traffic than would naturally come to it and possibly as much as it could induce to go that way, and possibly this was in the public interest, or at least not against it. The mere fact that the effect of granting it was to make legal and permanent an already existing practical unification — which was its sole effect — was no reason for subjecting the Southern Pacific to restrictions that it was not subjected to under such practical unification. It must be taken that the commission fully considered the effect of granting the application upon plaintiffs’ traffic and how the public interest would be affected by such effect, and that its determination at least was that to whatever extent the granting thereof affected the public interest injuriously in this field of transportation it did not affect it sufficiently to prevent the public benefit arising in the other field being such as to require that it be granted. It is not for us to say that in so determining it acted unjustly or unreasonably or arbitrarily. This ground also fails plaintiffs.
It must be held, therefore, that the two orders authorizing the acquisition of the control of the Cotton Belt by the Southern Pacific are valid. It follows that the order taking the Cotton Belt from System No. 10 Illinois Central and placing it in System No. 16 Southern Pacific was valid. There is where it belonged upon the acquisition of such control if it did not already belong thera It is not claimed otherwise.
The bill is dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218943/ | CAMPBELL, District Judge.
Plaintiff brings this suit against the defendant for relief by injunction and damages for the alleged infringement by the defendant, at its studio in Long Island City, of patent No. 1,825,598, issued to Yogt, Massolle, and Engl, by mesne assignments to the plaintiff, for process of producing combined sound and picture films, granted September 29, 1931, on application filed March 29, 1922, corresponding to German application No. V. 16431YI/57a2, filed April 14, 1921. This has been held by the Patent Office to be the effective date under the International Convention.
*463No evidence was offered showing any commercial activity of the plaintiff, or of any one operating under license from it.
The defendant is a well-known motion picture producer.
This suit is being defended by Electrical Research Products, Inc., the wholly owned subsidiary of the Western Electric Company, formed to take over the commercial distribution of the Western Electric talking motion picture sound recording and reproducing systems which were developed hy the research laboratories of the Western Electric and American Telephone & Telegraph Companies.
The defendant is licensed by the Research Products, Inc., to record for talking pictures by means of the Western Electric system, and has from the beginning used that system and apparatus.
The defendant has by answer interposed the defenses of invalidity and noninfringement.
This suit is based on claims 5 to 9, both inclusive, and claim 11 of the patent in suit, but claims 6 and 7 are to be read with the disclaimer, filed November 23, 1932.
Said claims and disclaimer read as follows :
“5. A process for producing a combined sound and picture positive film, for talking moving pictures, comprising, photographing a sequence of pictures on one length of film, and simultaneously photographing on another length of film a corresponding sequence of sounds accompanying the action, separately developing the two negatives in a manner appropriate for each, and printing the sound and picture negatives respectively upon different longitudinally extending portions of the same sensitized film, to form the sound sequence at one side of and along the picture ■sequence.
“6. A process for producing a combined sound and picture positive film, for talking moving pictures, comprising, photographing .a sequence of pictures on one length of film, and simultaneously photographing on another length of film a corresponding sequence of sounds accompanying the action, so that the picture and sound negatives may be separately developed in a manner appropriate for each, and printing the sound and picture negatives respectively upon different longitudinally extending portions of the same sensitized film, to form the sound sequence at one side of and along the picture sequence.
“7. A process for producing a combined sound and picture positive film, for talking moving pictures, comprising, photographing a sequence of pictures on one length of film, and simultaneously photographing on another length of film a corresponding sequence of sounds accompanying the action, so that the picture and sound negatives may be separately developed in a manner appropriate for each, and printing the sound and picture negatives respectively upon the same face of the same sensitized film at different longitudinally extending portions thereof, to form the sound sequence at one side of and along the picture sequence.
“8. The method of producing a talking moving picture record on a single film which comprises photographing simultaneously upon separate films the picture and the sound to form separate negatives, photographing said negative picture record upon a portion of a sensitized film not exposed to a sound record, and photographing the negative sound record on the same face of said last film and at a portion thereof not exposed to the picture record.
“9. The method of producing a talking moving picture record on a single film which comprises photographing simultaneously upon separate films the picture and the sound to form separate negatives, photographing said negative picture record upon a portion of a sensitized film not exposed to a sound record, and photographing the negative sound record on the same face of said last film and at a portion thereof not exposed to the picture record, said last two photographing steps being performed consecutively.”
“11. A process for producing a combined sound and picture positive film, for talking moving pictures, comprising, photographing a sequence of pictures on one length of film, and simultaneously photographing on another length of film a corresponding sequence of sounds accompanying the action, separately developing the records of said two lengths of film in a manner appropriate for each, and printing such developed sound and picture records respectively upon different longitudinally extending portions of a single sensitized film, to form the sound sequence at one side of and along the picture sequence.”
“Disclaimer.
“To the Hon. Commissioner of Patents:
“Your petitioner, American Tri-Ergon Corporation, a corporation organized and existing under the laws of the State of New York and having a place of business in the City, County and State of New York, represents that in the matter of certain improvements in Process for Producing Combined *464Sound and Picture Films, for which Letters Patent of the United States No. 1,825,598 were granted on September 29, 1931 to said American Tri-Ergon Corporation, as assignee by mesne assignments of the inventors, Hans Vogt, Joseph Massólle and Josef Engl, said corporation is the owner of the entire right, title and interest under an assignment dated June 6, 1930 and recorded in the Transfers of Patents of the United States Patent Office, July 3, 1930, Liber T 144, pages 192 to 199', and other assignments referred to in said assignment, and that your petitioner has reason to believe that through inadvertence and without any fraudulent or deceptive intention, the specification and claim of said Letters Patent are too broad, including that of which said inventors were not the first inventors. Your petitioner therefore hereby enters this disclaimer to that part of the claim which it does not choose to claim or hold by virtue of the patent or said assignments, to wit:
“(a) The process as set forth in claim 6, except wherein the picture and sound negatives are separate films at the time of development.
“(b) The process as set forth in claim 7, except wherein the sequence of pictures is photographed upon a film separate from that upon which the sequence of sounds is photographed, and the picture and sound negatives are separately developed, in a manner appropriate for each, and are consecutively printed upon the same sensitized film.”
More than nine years elapsed between the date of the filing of the application in question in the United States Patent Office and the date of the granting of the patent in suit, and the claims in suit were introduced by amendment dated July 15,1931.
During that long period of time the defendant and the Western Electric, its parent company, engaged extensively in the commercial distribution of said Western Electric talking motion picture sound recording and reproducing systems.
At the time of the application in the United States Patent Office for the patent in suit in 1922, it was common and necessary practice in the motion picture industry to compensate, so far as was possible, for over and under exposure of different scenes or takes of motion pictures by under and over development, respectively, of the picture negatives.
This was accomplished by what was known as the rack and tank development, in which each scene was wound on a rack and then submerged in a tank containing the developer, the development being watched by the operator, who from time to time lifted the rack and film from the tank, and, exercising his individual judgment, determined the extent to which the development of the particular scene should be carried.
This, of course, resulted in merely a compromise, inasmuch as no amount of manipulation would make it right, if the exposure was not correct in the first place, but would merely change the degree in which it was not correct.
In recording sound photographically, the negative sound record, it was realized, would be uniformally, if not correctly or normally, exposed (a uniform source of light being used), and therefore should receive a uniform development throughout.
To continue the practice of compensating in the developing of the pictures for under and over exposure of the pictures, the patentees wished to develop their picture records separately from their sound records.
This the patentees described in their specifications as originally filed in the United States, in 1922, as follows:
“In the production of speaking films it is of great advantage especially from the point of view of use, to arrange the sound sequence and the picture sequence upon one and the same material carrier (film).
“In this procedure, however, there frequently occur in consequence of the changing lighting conditions in the cinematographing process, changes in the degree of light and the bromide of silver layer, and this causes the picture sequence to be either overlighted or underlighted.
“As the same film, however, bears close to the picture sequence the continuously normally lighted sound sequence, these differences cannot be removed in the case of combined negatives, by developing, weakening, strengthening, and so forth. They can only be removed by subjecting the underlighted or the overlighted negative places to separate corresponding treatment.
“Technically, this treatment is practically impossible so long as the two sequences are photographed upon the same film.”
Further such original specification says: “According to the present invention the difficulty is overcome by either employing entirely separate films for the production of the negatives, or films which are connected during the photographing, but which are separated from one another before the developing.”
The difficulty which the patentees were *465seeking to overcome was under and over exposure of tbe different picture scenes, which they proposed to do by developing the negative picture records separately from the negative sound record.
The alleged invention cannot be considered as broadly, for having the picture and sound records on different films, so that they are separately developed, as that was old and there would be no invention.
The paragraph of the specifications last quoted proposes two ways of obtaining the separate negatives: (1) To record sound and picture films on separate films in the first instance; (2) to separate the two records after recording them on the same film. This is shown on the drawings added by amendment.
Fig. 1 shows sound and picture records recorded on separate films of standard width. Fig. 3 shows two negative records recorded on a wide nonstandard film, having three rows of sprocket perforations, and which are severed at either p or u before development. Fig. 2 shows a wide nonstandard positive print produced by printing the separate or separated negative records preferably consecutively on the same film.
The specification states that the two negatives of Fig. 1 or the separated negatives of Fig. 3 may be united or pasted together prior to the printing and then copied “in the usual manner.”
In the separate film process of Fig. 1, there are three or four steps depending on whether the two records are or are not pasted together before printing; namely: (1) Exposing: (2) developing; and (3) printing; and, if the two records are pasted together before printing, that constitutes the fourth step.
In the divided film process of Fig. 3, which is claimed in claim 2, there are four or five steps, depending on whether the divided or separated negatives are or are not pasted together or reunited before printing; but this process needs no further consideration as it is not in suit.
The claims in suit may be divided into two groups; namely: (1) Claims 8 and 9, which are two-step claims for exposing and printing; (2) claims 5, 6, 7, and 11, which are three-step claims, the additional step being the developing, claims 6 and 7 being read with the disclaimer.
The specification further states:
“The synchronism is assured in both eases by the perforations and by corresponding marks. The production of the positive films can take place by copying tbe two negative films preferably consecutively upen the same positive films.
“One can, however, also unite, previously, the two negative films longitudinally together, and then copy this so united negative in the usual manner.”
Nowhere in their said original specification or claims did the patentees state or even suggest that it was at all material that the two negatives be printed on the same side or face of the positive film.
Plaintiff's expert says that he finds it by inference which he gets from the specification, and prior practice on this point.
I cannot agree with him.
The most that the patentees in the specification say is that it is desirable to “arrange” the two records “upon one and the same material carrier (film)”; that the production of the positive films can take place by copying the two negative films preferably consecutively upon the same positive films; and, in original claim 1, that the two records are “copied upon single film.”
The idea of recording sound on film, of recording pictures on film, or both sound and pictures on the same film, of recording sound and pictures on separate films so as to be able to develop them separately and then project them together, or of printing sound and pictures from separate negatives upon a single film, were separately and collectively old prior to the conception date of either party, neither of which goes back of 1921.
See Greensfelder patent, No. 1,254,684, which disclosed everything but simultaneously recording; De Forest patent, No. 1,446,-246.
It is true that Greensfelder recorded his sound record after he took his pictures, instead of doing it at the same time.
There was, however, no novelty in simultaneous recording, as this was old. For example, see Bullis patent, No. 1,335,651, and Craig patent, No. 1,269,337.
The plaintiff urges that defendant cannot with good grace contest patentability, in view of the application of Wente, a research engineer of the Western Electric Company, to which he assigned such application; but this contention was not sustained. Wente did make broad claims as is customary, but those broad claims were canceled on the first amendment, and as I believe on Greensfelder rather than on the Vogt British patent. In any event, claims similar to some of the Wente .claims so canceled were made by *466Craig, in 1913, and canceled as unpatentable at that time.
The claims of the patent granted to Wente are limited, and I do not see how his application prejudices the defense in this action.
The plaintiff’s expert stated on cross-examination that what he thought was new in the patent in suit, and not found in the prior art, was printing both the separately exposed, separately developed, negatives side by side, on the same side of the positive film.
On redirect examination he stated that in addition to what he had previously stated was new over the prior art was the process of simultaneously recording the sound and picture record, and in printing them side by side on different longitudinally extended portions of the same positive film, without regard to whether they are separately developed or not.
The original specifications were amended to state that the separate development step might be eliminated.
This amendment invalidated the two-step claims, as a separate development to overcome under and over exposure of the different picture scenes was the most important part of the disclosure, and by its elimination the invention claimed therein was different and broader than the one disclosed by the patentees in their application as filed.
It was old and well known in the art to have both the picture sequence and sound sequence printed side by side on a positive film, and also to put the sound record beside the picture record on a single film.
Walker patent, No. 1,168,717, discloses that the picture negative and sound negative were put on different longitudinally extending portions of the positive film at different times.
Craig patent, No. 1,260,337, discloses in the negative process recording of sound negatives and picture negatives on separate films, and the two negative films developed separately and printed on opposite sides of one film.
The patentees filed their first application for the alleged invention in Germany, on April 15, 1921, and thereafter within the convention period they filed their application in the United States on March 20, 1922, and their British application on April 11, 1922; .all three being substantially identical, including their claims. The original claim 1 was for the two-step process of developing and printing, specifying that the two records are developed separately, but not whether made on one or two films, and then printed on a single film. Claim 2 was limited to these two steps by reference back to claim 1, and added the third step of exposing or photographing the two records on separate films. Claim 3 was limited to the two steps of claim 1 and added two additional steps; namely, the photographing on a single film and the subsequent dividing of that film for separate development. Claim 4 refers back to the several steps of each of the three preceding claims, and adds to the several steps of each the step of reuniting the two negatives before printing.
The application of the patentees in each of the three countries was therefore for a patent for their separate film process.
Defendant offered in evidence the file wrappers and contents of the German patent office, and the British patent office, but I can find no authority for their reception other than to show what was the application originally filed, and the patent that was granted.
The German patent issued to the patentees was published on February 2, 1923.
There was offered in evidence the German patent No. 279,598, of 1914, to Reimer, which specifically claimed: “Process for the making of a film which consists of an image band and a sound band having the distinctive feature that each band is made as an individual separately, and that both bands are thereupon combined with each other.”
This appears to exhaust any novelty as a /process in the patentees’ separate film process.
Defendant also offered in evidence the British specification offered to public inspection by the British patent office on April 15, 1922, four days after it was filed. This was admissible to show the application that was filed.
Defendant also offered in evidence British patent No. 178,442, as printed and placed on sale at the British patent office on December 7,1922.
Between April 15, 1922, the time of filing, and December 7, 1922, when the application was printed and placed on sale, the fourth paragraph of the specification was changed by substituting the following:
“The process for the production of combined sound picture films hereinafter set forth differs from previous attempts in this direction, chiefly in the perfect synchronization of the sound and picture sequences, whilst permitting of the separate development of the respective negatives necessitated by unavoid*467able variations in the lighting of the filma during the initial exposure.
“Attempts have been made to attain the end in view by taking the two negatives separately and independently and subsequently combining the records for reproduction; but it is found impossible to secure full synchronization in this manner.
“It has also been proposed to pass two separate films for the picture and sound records respectively, the film being driven positively and simultaneously by passing over the same sprocket wheel through a talking apparatus and to provide means for producing a series of corresponding identification marks upon the films by aid of which the two films after separate development can be reassembled; but this process also lacks the requisite accuracy of register.
“According to the present invention, the difficulty is overcome by employing films for the production of the negatives which are integral during the photographing, but which are separated from one another before developing.
“After development, these two negative films are reunited and are copied upon the same positive film. In this v/ny, the absolute coincidence of the sound and the picture record, respectively, is assured, whilst the needful difference in treatment can be given during the development.”
The patent was published with only one claim, as follows: “Improved process for the production of combined sound and picture records, in which the sound record and the picture record are produced simultaneously on a single film, which is then divided and the two parts developed separately, and after-wards reunited and used to print the single positive record.”
This brings us to the United States application.
On April 14, 1922, the day before the British application was opened to the public, the United States Patent Office Examiner acted on the application, and cited the Bullis patent, No. 1,335,651.
On November 25, 1922, shortly before the revamped British patent was published, the patentees canceled all the original claims of the United States application, and inserted a single claim which was identical with the single claim of the British patent, supra.
This action, it seems to me, must have been taken in view of the Bullís patent,
No drawing was filed with the original application, but by amendment a drawing was filed on November 25, 1922.
The defendant frequently referred to counsel’s arguments and statements during the progress of the patent through the Patent Office, but these are not admissible to show estoppel, and therefore I have not considered them.
The new claims were specifically limited to the divided film process.
The actions of the patentees on their applications in Great Britain and the United States seem to mo to be susceptible of only one interpretation, and that is, that they are intended to and did abandon the alleged invention covered by the claims in suit.
On April 19, 1923, after the British Patent was issued, the Examiner in the United States Patent Office rejected the single claim, stating: “The claim is rejected as not involving invention over Bullís of record. It does not involve invention to make the record on a single film instead of on two films rigidly attached together, especially in view of the fact that the single film is afterwards cut apart as the parts of the united film are taken apart.”
The patentees by amendment acquiesced in the rejection and canceled their single process claim without reservation of any kind, and inserted in the amendment two product claims, requiring in each claim one homogeneous film band, on which the sound records and picture records are copied, the first claim being for a composite print produced from separate films, and the second claim for a composite print produced from a cut or divided single film.
The Examiner, on October 15, 1923, rejected claim 1 upon the prior Craig patent, No. 1,260,337, which he held “shows a film on which two separate negatives are copied.” He further said: “Claims 1 and 2 are rejected as defining an article by the process of making it. In order that claims of this character may be allowed, it is necessary that the article have physical characteristics which an article made in the old way would not have. This is not true in this case.”
The Examiner further said: “Claim 1 is required to be cancelled. In response to the requirement for division contained in the Office Action of April 14, 1922, applicant elected the form in which the records were made on a single film and then cut apart. He cannot now claim the species in which they are now made on two separate films.”
*468No further action was taken for nearly a year.
In the interim plaintiff’s present counsel were retained to prosecute the application which they continued during the remaining seven years.
They interviewed the Examiner, and on September 29, 1924, filed an amendment containing two process claims, the obvious purpose of which, it seems to me, was io recapture the pi’oeess which had been abandoned.
On January 26, 1926, the Examiner rejected both claims, citing Greensfelder patent, No. 1,254,684, and also the abandoned British specification No. 157,751, filed by the patentees of the patent in suit, and corresponding to French patent No. 532,750,
The applicants on April 2, 1925, by amendment added as claims 3 and 4, claims 1 and 3 of patent No. 1,489,314, to De Forest, which had issued a year before, and requested an interference.
On April 6, 1925, the Examiner again rejected the claims on their merits, and said: “Claims 1 and 2 are rejected on Craig, 1,260,-337 in view of Greensfelder, 1,254,684, both of record. It is shown to be old in Craig to take separate synchronous sound and picture records simultaneously, and to then reproduce these two records on a single record strip. Applicant desires to reprint both records on one side only; but this is the teaching of Greensfelder. Note page 3, line 128, to page 4, line 8.” The Examiner was the same. Examiner who had granted the De Forest patent, and he further said: “Claims 3 and 4 are rejected as not based on the disclosure of applicant. Applicant takes a sound record and a picture record and reproduces these two records on a third film. These claims, however, call for a sound record and a picture record as does applicant, but the claims then define that the sound record is reproduced on the original picture record strip which is not the method of applicant. If, however, it requires that a positive of the sound record be made and a reprint of this be taken on the original picture strip, still it would not be the method outlined by applicant in his specification. The steps are clearly not the same. Referring to the ease of the patentee, the reference Craig cited in this action was held not to be a reference against the claims here under consideration, and though the steps in the method of applicant and of Craig are the same, yet the claims of patentee were held patentable over Craig. Therefore, it is evident that applicant cannot make the claims of the patentee as applicant does not disclose such a method in Ms application.”
On April 23, 1925, the patentees filed another amendment.
On April 27,1925, the Examiner allowed the divided claim, but finally rejected claim 1 and claims 3 and 4, of the two De Forest claims.
From tMs action an appeal was taken to the Examiners in Chief.
Under the rule of the Patent Office, no question of patentability or invention could be considered in connection with the De Forest claims, because those claims were taken from an issued patent, and the Examiners did not find a clear anticipation.
Having decided that the patentees could make the De Forest claims, the Examiners under the rule rendered a perfunctory decision as to the patentability of the other appealed claim which was more limited by specifying the separate development step, and said: “The Examiner allowed these claims, wMch is evidence of their patentability, notwithstanding that the Greensfelder patent was prior art, and which shows the printing of the two positives side by side, Fig. 5, as does also the Craig patent as above set forth. Greensfelder does not photograph his negatives simultaneously. While the disclosure in these patents may tend toward a possibility of doubt as to invention being involved in the process defined by claim 1, the grant of the patent to De Forest and the lack of clear anticipation in either of the references or in their combination as to the addition or substitution of features in one not shown in the other and involving the question of invention vs. mechanical skill, we are of the opinion that claim 1 should be allowed in the absence of more pertinent and anticipatory art and appellants allowed to be placed in interference with De Forest to determine the question of priority.”
The interference was decided on the merits in favor of the patentees by the Examiner of Interferences and also by the Board of Appeals, and an appeal was then taken to the Court of Customs and Patent Appeals, in which last named court, on the argument, counsel for De Forest in effect conceded priority to the patentees, and the decision of the Board of Appeals was affirmed.
I have not considered the arguments or briefs on the interference, as I am.not satisfied that they are admissible.
The interference with the De Forest claims should not have been allowed. Those claims were for a different process than that dis*469closed by tbe patentees. This appears to me to have been conceded by plaintiff’s counsel in his opening statement on this trial.
Those claims could never have dominated the patent in suit, for, if so broadly construed, they would not have been sustained over the Craig patent, No. 1,260,337, as the claims themselves read on the Craig patent, if the limitation to the additional rephotographing step is not given its intended meaning.
What De Forest taught and the meaning of the claims clearly appears from the specification of his patent, and that was, instead of printing his sound and picture records directly onto a positive film, as in the patent in suit, De Forest introduced the separate and distinct additional step, namely, a photographing or rephotographing of the sound record onto the original picture negative to obtain “a more exact and faithful photograph containing any details of the finest light variations produced by sound waves.” De Forest preferred to make the original sound record larger in size than could be accommodated with the pictures on the positive film, and to reduce its size by the additional photographing step.
Except for the interference which was sought on behalf of the patentees and was not forced on them by De Forest, I am convinced that the patent in suit would not have .been granted with the claims in suit, and it is worthy of note that the only claims in suit which state that the two records are printed on the same side or face of the film, a point on which plaintiff lays great stress, are claims 7, 8, and 9.
By the amendment of July 15, 1931, the alleged invention of the patent in suit was broadened to eliminate the separate development step, the most important part of the original disclosure, and to disclose the different two-step process of exposing and printing.
Claims 8 and 9, as I have hereinbefore pointed out, are invalid, as they are for a different alleged invention than the original. Motion Picture Patents Co. v. Independent M. P. Co. (C. C. A.) 200 F. 411.
The only other two-step claims in suit, 6 and 7, were by the disclaimer limited to the third step of separate development.
Further, the two-step claims in suit and the broadening amendments were not inserted until July 15, 1931, and that was long after the process had gone into public use, and such an attempt should be regarded by the courts with disfavor. Chicago & N. W. Railway Co. v. Sayles, 97 U. S. 554, 563, 24 L. Ed. 1053.
Plaintiff contends that it made a two-step claim as early as July, 1925, which was when it found the De Forest patent, but even then it was new matter and was not accompanied by the broadening amendments to the specification inserted July 15, 1931.
The alleged invention of the claims in suit is a process and not an article or product.
A process consists of certain steps or operations in which the invention, if any, must reside. Cochrane v. Deener, 94 U. S. 780, 24 L. Ed. 139; Walker (6th Edition) § 19.
The patent in suit is entitled “Process for Producing Combined Sound and Picture Films.” It is merely an example of composite or combination printing, a term applied to the making on a single piece of photographic sensitive material prints or impressions from two or more separate negatives, which is very old.
No photographic operation is involved which was not employed in the old art of composite printing which involved both simultaneous and consecutive exposure of separate negatives, separate development of those negatives in an appropriate manner and with different lengths of development, and both simultaneous and consecutive printing of the separate negatives on a single positive film; and was used in both black and white and color photography, and in both still and motion pictures, long before any date important here.
The patentees made no contribution to the art of photography.
Before 1900, sound was recorded photographically.
Photographic recording of sound with motion pictures and producing a combined sound and picture film, the same as the film in use to-day, is described in Haines British patent, No. 18,057, of 1906.
The composite printing process of the patent in suit for sound pictures was adopted as the need arose, and was used by Craig as early as 1913.
Tbe Craig patent, No. 1,260,337, discloses simultaneous recording of sound and pictures on separate films, which are developed separately and printed consecutively on the same positive film, and also shows in Fig. 8 a plurality of sound records printed side by side on the same side of his positive film.
I disagree with plaintiff and agree with *470defendant’s expert Jones, that the Craig’ patent was operative.
The Craig patent, as I view it, although this is now disputed by plaintiff, anticipates any invention in the process defined in the claims in suit. It is true that Craig printed his sound record on the opposite, rather than on the same, side of the single positive film, but printing sound and picture records on the same side of the film was well known in the art at that time, and Craig’s specification shows that he contemplated printing the sound record on the same side of the film as the pictures, as he says therein:
“It will be noted from what has gone before that so far the negative of the sound record and the negative of the picture record have been made upon separate strips or films. It is necessary, therefore, that these two negatives should be photographically printed upon one film or upon opposite sides thereof.”
Even if the patent was silent on that point, the patentees cannot base their monopoly upon the printing of the sound and picture negatives on the same side of the film, which was old and well known, and was not even mentioned in the patentees’ original specification.
What the patentees were concerned with was the separate development then required for different portions of the picture negative.
The Greensfelder patent, No. 1,254,684, disclosed, as I understand it, although this is now denied by the plaintiff, everything in the claims in suit but simultaneous recording.
It cannot be distinguished on the ground that it teaches nothing regarding the recording of acoustic vibrations. It discloses photographing of the sound in the sense of photographically producing a sound record, and a picture record, each on separate films, and then printing both on different portions of the same film.
Simultaneous recording of pictures and sounds was obvious and universal practice, and was disclosed in the Craig patent, No. 1,260,337.
Separate development was old and well known in the art, and Craig and Greensfelder separately recorded records would of necessity be separately developed.
Again I disagree with the plaintiff, as it seems to me that the Bullís patent, No. 1,335,-651, disclosed everything in the claims in suit but printing the simultaneous and separately developed negatives on a single homogeneous film. His apparent preference was for producing his single positive film, by first printing from his negatives, and then joining them together.
This, however, does not seem to me to be sufficient to relieve the claims in suit from anticipation, as it was old in the art to print on the same film simultaneously and separately developed negatives.
No reason has been shown, nor have I found any, why it is impossible for the Bullís patent and the Craig patent, No. 1,260,337, to be combined together to anticipate the claims in suit; therefore I disagree with plaintiff’s contention that they cannot be so combined together.
The Bullís construction is not impraetical.
The Bullís patent was cited by the Examiner early in the prosecution of the patent in suit, and, as it seems to me, resulted in the cancellation of the original claims.
Erom that time on, however, it was undoubtedly lost sight of, and was not called to the attention of the Examiners in Chief, and, while as plaintiff contends it may have been in the file, yet no reference was made ,to it by them, and, as I consider it a most pertinent reference, it seems to me that the fail-. ure to cite it against the claims as finally allowed deprives the patent in suit of the presumption of validity over the prior art.
Walker patent, No. 1,186,717, which is for a combined camera and recorder, was not cited in the Patent Office in the prosecution of the patent in suit, but was a pertinent reference. It discloses the consecutive printing of sound and pictures on the same side of a single positive film of standard width, and I agree with the expert Jones, there “is no functional difference between printing consecutively the picture record and the sound record on the single positive film, as disclosed in this Walker patent, and printing consecutively the separate sound and picture records on a single positive film as disclosed in the patent in suit.”
Walker’s film is of standard width; the patentees’ film is nonstandard.
Walker’s film, I believe, could be produced by using the separate negatives of Craig and Bullís, in Walker’s printer.
It was everyday practice in the motion picture industry, as early as 1908, to print on standard positive film composite pictures from separately developed negatives.
See testimony of Nonnenbaeher, and Messter patent, No. 1,286,383; British patent *471to Rossi, No. 21,467, A. D. 1902; and British patent to Downing, No. 6,727, A. D. 1913.
Each of these patentees made their records on separate films, developed them separately, and printed a plurality of records on the same side of the positive of a moving picture film. The process of the patent in suit is not changed from the process of those patents, as it matters not whether the records printed on the same side of the film he sound and pictures, or a plurality of pictures, as the process steps are identical. Brown v. Piper, 91 U. S. 37, 23 L. Ed. 200, Penn. Railroad v. Locomotive E. S. Truck Co., 110 U. S. 490, 4 S. Ct. 220, 28 L. Ed. 222; Dreyfus v. Searle, 124 U. S. 60, 8 S. Ct. 390, 31 L. Ed. 352.
It seems clear to me that in combining the old elements of the claims in suit there was no invention by the patentees, but merely a judicious selection from the prior art. Newcomb, David Co. v. R. C. McMahon Co. (C. C. A.) 59 F.(2d) 899.
It is not necessary that all of the elements of an alleged invention be found in one patent. Zimmerman v. Advance Machinery Co. (C. C. A.) 232 F. 866, 869, 870; Dilg v. George Borgfeldt & Co. (C. C. A.) 189 F. 588, 590; Keene v. New Idea Spreader Co. (C. C. A.) 231 F. 701, 708; Linville v. Milberger (C. C. A.) 34 F.(2d) 386, 388; Reflectolyte Co. v. Luminous Unit Co. (C. C. A.) 20 F.(2d) 607, 611.
The question is, not whether the claims in suit are anticipated by any one patent, but whether there is any invention over the prior art, and I ain unable to find any such invention.
The three following described patents relate to sound pictures per se:
British patent to Pederson, No. 115,942, A. D. 1918, discloses the recording simultaneously of sound and pictures photographically on a single film. After suitable treatment, the sound negative is separately impressed on the single positive film by embossing, which is a printing operation but not photographic printing, on which the pictures are printed from the original negative.
Kinderman British patent, No. 18,163, of 1913, discloses the attaching to the picture negative of a separate wax-coated strip on which he recorded his sound, simultaneously with his pictures, by means of a stylus.
Reimer German patent, No. 279,598, of 1914, discloses the recording of sound and pictures simultaneously on separate bands, the picture negative being separately developed, and the sound record separately treated by the well-known galvanic process. A copy of the sound record is then made and attached to the separately printed picture positive, forming a single combined sound and picture film.
As to the disclaimer filed herein, after plaintiff had been furnished with a statement showing that both of defendant’s films receive the same character of development, it seems to me to be'for a purpose that the statute was never designed to permit. Fruehauf Trailer Co. v. Highway Trailer Co. (D. C.) 54 F.(2d) 691.
Even with the disclaimer, claims 6 and 7 show no invention over the prior art.
The claims in suit show no invention over the prior art.
Plaintiff recites at length what it contends are the advantages of the alleged invention, but it seems to me that it does not point to any advantage which does not apply to the prior art which I have considered, and some of the advantages recited by plaintiff are not mentioned in the patent in suit.
The eases cited by plaintiff to show validity do not seem to me to he in point.
No commercial success is shown by the plaintiff, and the patentees made no real contribution to the art. The success of the defendant, its licensor, and its licensees is due to the many inventions of the Western Electric Company, without which success would have been impossible.
The claims in suit of the patent in suit are invalid by reason of anticipation and lack of invention over the prior art.
The patent in suit is further attacked as invalid under section 4887 of the Revised Statutes, title 35, § 32, U. S. Code (35 USCA § 32), so much of which as is necessary for consideration herein providing as follows: “No person otherwise entitled thereto shall be debarred from receiving a patent for his invention or discovery, nor shall any patent be declared invalid by reason of its having been first patented or caused to be patented by the inventor or his legal representatives or assigns in a foreign country, unless the application for said foreign patent was filed more than twelve months, in cases within the provisions of section 31 of this title [4888 of the Revised Statutes], and four months in eases of designs, prior to the filing of the application in this country, in which case no patent shall be granted in this country.”
Patentees’ French patent, No. 532,750, was granted November 21, 1921, on an ap*472plication filed March. 25,1921. This appliear tion was filed more than one year before March 39,1922, the filing date in this country of the patent in suit. The French patent was granted long before the patent in suit.
The prosecution of the application filed in this country April 4,1921, was abandoned by the applicant.
It seems clear to me, although it is sharply contested by plaintiff, that the French patent is for the same alleged invention as the patent in suit, as it discloses simultaneous recording of sound and picture records on separate films, which, by reason of being separate, are necessarily separately developed, and printing of the separate negatives on the same positive film.
While it is true that what is known as “scoring,” in which the sound is recorded after the pictures are taken and while they are being projected, is also disclosed in the French patent, that does not change my opinion hereinbefore stated, that the patent in suit is for the same alleged invention, and that is the question to be determined. General Electric Co. v. Alexander (C. C. A.) 280 F. 852, 854.
Plaintiff’s contention that this defendant failed to prove what invention was patented under the laws of France, in the said French patent, is not sustained.
The French patent is in evidence and speaks for itself, and both describes and claims the alleged invention of the patent in suit.
The courts in dealing with this statute have always looked to the claims of the foreign patents and read them in the light of the disclosure and decided what is patented, the same as they do with the domestic patents. Merrell-Soule Co. v. Powdered Milk Co. (C. C. A.) 222 F. 911, 913; Sirocco E. Co. v. B. F. Sturtevant Co. (C. C. A.) 220 F. 137, 143; Commercial Acetylene Co. v. Searchlight Gas Co. (C. C.) 188 F. 85; Siemens’ Adm’r v. Sellers, 123 U. S. 276, 282, 8 S. Ct. 117, 31 L. Ed. 153; Leeds & Catlin v. Victor Talking Mach. Co., 213 U. S. 301, 321, 29 S. Ct. 495, 53 L. Ed. 805; Fireball Gas Tank, etc., Co. v. Commercial Acetylene Co., 239 U. S. 156, 165, 36 S. Ct. 86, 60 L. Ed. 191.
See, also, Western Electric Co. v. Citizens’ Tel. Co. (C. C.) 106 F. 215, at page 217, where it is expressly stated that the laws of the foreign countries were not proved, but. the court held that, the foreign patent, an Italian patent having no formal claims, was for the same invention.
The French patent undoubtedly claims the process of claims 6, 8, and 9 of the patent in suit, and I can find no support for plaintiff’s contention that the French claims do not touch upon separate development which is specified in claims 5, 7 (by disclaimer), and 11 in suit.
Separately recorded records are described and expressly claimed in the French patent, and the evidence clearly shows that separately recorded records are necessarily separately developed.-
Plaintiff’s attempt to distinguish between claims 7 and 9 of the patent in suit and the French claims, on the alleged grounds that the latter do not touch upon the matter of consecutive printing, and that the French claims do not state that the films are separate at the time of development (as stated in disclaimer, amendment 6), utterly fails.
Neither is a.matter of substance nor constitutes the essence of the alleged invention.
That the films are separate at the time of development is obvious, and claim 5 of the French patent clearly states that the two records are copied on the same film, and it is of no moment whether both records are printed at once, or one after the other.
What is required to constitute identity of a patent within the purview of section 4887 (35 USCA § 32) is substantial, not formal, identity of invention, as covered by the claims. United Shoe Machinery Co. v. Duplessis Shoe Mach. Co. (C. C.) 148 F. 31, 34, 35.
The abandonment of the application based on the French patent, which was for the same alleged invention as that of the patent in suit, made it impossible for the patentees to obtain a United States patent on an application, filed more than one year after the French application, for the alleged invention of that patent. Robert Esnault-Pelterie v. Chance Vought Corporation, C. C. A., Second Circuit, 66 F. (2d) 474, July 17, 1933.
The patent in suit is invalid under section 4887, Rev. St. title 35, § 32, U. S. Code (35 USCA § 32), unless plaintiff can maintain its contention that the application for the patent in suit is a continuing application, and entitled to the dates of the abandoned application.
In order to accord to the patent in suit, the date of the abandoned application, intent to continue the earlier abandoned application by means of the application for the patent in suit must be shown.
*473On the face of the application for the patent in suit, it was entirely independent of, and hostile to, the abandoned application, and nowhere in the prosecution of the application for the patent in suit is there any suggestion of the intent to continue.
Further, it seems to me that, in the prosecution of the application for the patent in suit, the intent to continue was not merely absent, but that the evidence shows an intent not to continue.
As late as April, 1931, in the brief filed on behalf of the patentees in the interference with De Forest, it was stated that the earliest date to which they could carry back the date of application for the patent in suit was “limited to April 14, 1921,” the date of the German application corresponding to the patent in suit.
The preliminary statement of patentees in said interference states: “The invention was introduced into the United States by the application papers, viz., the present application Ser. No. 547,860, which papers were received in the United States on or about the 24th day of March, 1922.”
It contains no reference to the application for the French patent on which plaintiff now seeks to rely, or to any other foreign application corresponding to the abandoned United States application.
The oath to the application for the patent in suit contains no reference to the application for the said French patent or other corresponding foreign application, as required by the rules of the Patent Office.
On January 26, 1925, the Examiner rejected the patentees’ claims on the patentees’ own British application, No. 157,751, corresponding to the abandoned United States application and the said French patent.
No attempt was made by the patentees to carry back their date to that of the abandoned application, but they contended that the British complete specification was not accepted and the application had become void, and that, although a publication, it was not available as a reference, as it was not a printed publication more than two years prior to the then pending application.
No mention was made of the French application which had inured into a patent some years before.
It seems clearly established that the patentees did not intend to continue the abandoned application but to prosecute the application for the patent in suit as an independent and hostile application. American Casting Mach. Co. v. Pittsburgh Coal Washer Co. (C. C. A.) 237 F. 590.
That the Scott’s abandoned application described in the ease last cited was a joint application does not change the situation, as a joint application could, while pending, have been amended to make it a sole application or a new joint application filed while preserving the benefit of the date of the original application. Union Switch & Signal Co. v. Kodel Elec. & Mfg. Co. (C. C. A.) 55 F.(2d) 173; In re Roberts, 49 App. D. C. 250, 263 F. 646; Bijur v. Kennington, 51 App. D. C. 230, 278 F. 313; and Briggs v. Kaisling, 53 App. D. C. 49, 288 F. 254.
The following eases cited by plaintiff are not in point, as in each case a clear intention to continue was expressed while the application was pending: Smith v. Goodyear Dental Vulcanite Co., 93 U. S. 486, 23 L. Ed. 952; Corrington v. Westinghouse Air Brake Co. (C. C. A.) 178 F. 711; Novadel Process Corp. v. J. P. Meyer & Co. (C. C. A.) 35 F. (2d) 697.
Plaintiff is debarred from claiming, as it did for the first time on the final hearing of this suit, that the application for the patent in suit is a continuing application, and entitled to the date of its abandoned application.
The patent is invalid.
A decree may be entered in favor of the defendant against the plaintiff dismissing the bill of complaint on the merits, with costs.
Settle deeree on notice.
Submit proposed findings of fact and conclusions of law in accordance with this opinion for the assistance of the court, as provided by Rule 70% of the Equity Rules (28 USCA § 723) and Rule 11 of the Equity Rules of this court. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218945/ | SIBLEY, Circuit Judge, and UNDERWOOD arid STRUM, District Judges.
Three hills were filed against the United States and Interstate Commerce Commission, one by the state of Florida and the Florida Railroad Commission, another by Wilson Cypress Company and Wilson Lumber Company, and the third by F. S. Bufihun & Co., Inc. Each upon similar allegations seeks to set aside and enjoin an order of the Interstate Commerce Commission made July 5, 1932, and amended July 28, 1932, whereby rates were prescribed for the intrastate carload shipments in Florida of logs of certain classes conforming to rates established as reasonable for like shipments in interstate commerce between Florida and Georgia. The Atlantic Coast Line Railroad Company, the carrier whose rates were involved, intervened. After the grant of an order suspending the operation of the rates the hills were by consent consolidated and heard before a court of three judges on the pleadings and on the evidence submitted.'
Findings of Fact.
The attacked order of the Commission is its final judgment on a proceeding instituted in 1926 by the Georgia Public Service Commission to which the complainant and intervener in the present hills became parties. The then existing interstate rates on logs between Florida and Georgia were complained of, and the Florida intrastate rates referred to as the Cummer Scale were attacked as causing undue prejudice to persons and places in Georgia in their commerce with Florida, and unjust discrimination against interstate commerce under section 13 of the Interstate Commerce Act (49 USCA § 13). After lengthy hearings, on August 2, 1928, reasonable interstate rates were fixed, and upon a general finding that' the intrastate rates in question caused discrimination against interstate commerce an intrastate rate was. prescribed to conform to the new interstate rates. Georgia Public Service Comm. v. Atlantic Coast Line R. Co., 146 I. C. C. 717. On attack in this court against that part of the order fixing the intrastate rate it was upheld as justified for the removal of discrimination against persons and places in Georgia by confining its application to north Florida. State of Florida v. U. S. (D. C.) 30 F.(2d) 116. The order was, however, clarified by the Commission so as to require its application to the entire state, and upon further attack it was upheld as proper to remove a discrimination against the general interstate commerce of the carrier in that state rates were so low as to be unremunerative and to burden the revenues of the carrier. State of Florida v. U. S. (D. C.) 31 F.(2d) 580. On appeal the Supreme Court declined to consider the evidence, hut reversed the judgment because there were not distinct findings by the Commission of the facts going to show such discrimination by a burden on revenues, the court holding that the general finding that there existed a discrimination against interstate commerce in the language of section 13 (4) of the act (49 USCA § 13 (4) was insufficient to authorize the Commission to exercise its powers under that section; hut it was suggested that such findings might yet he made upon proper evidence. State of Florida v. U. S., 282 U. S. 194, 51 S. Ct. 119, 75 L. Ed. 297. This court accordingly entered its decree setting aside and annulling the portion of the order complained of. Thereupon the Georgia Public Service Commission and the Atlantic Coast Line Railroad Company on due notice to all parties, including the present complainants, moved the Interstate Commerce Commission to reopen the case before it, which over objection was done, and much new evidence was added to that previously taken. A motion was made by the present complainants at the beginning of the hearing to dismiss the proceedings as respects any issue of burden on the revenues of the carrier, and to exclude all evidence directed to that contention. The motions were overruled by the Examiner, and again by the full Commission, which after argument made an elaborate and lengthy report of its findings, put aside the question of undue prejudice by the state rates to persons and places in Georgia as unnecessary to he decided, but held the rates to he burdensome on the interstate carrier’s revenues and thus a discrimination against interstate commerce, which it removed by again prescribing under section 13 (4) of the act future state rates to conform to the interstate rates which it had established as reasonable. Georgia Public Service Comm. v. Atlantic Coast Line R. Co., 186 I. C. C. 157.
We find the conclusions of fact in the *479Commission’s report to be well supported by the evidence, and such as we would ourselves make therefrom. Referring to that report for details, we summarize the ultimate facts most material to the present issues. The state rates known as the Cummer Seale were voluntarily established in substance in 1903 and 1904 by Jacksonville & Southwestern Railroad Company, when railroad and timber to be transported were owned by the same interests. The rates were inherited by the Atlantic Coast Line Railroad Company on purchasing the railroad involved, and were by it applied as carload rates over all its lines in Florida in 1914. The Florida Railroad Commission at the time asserted that it did not approve the rates though perforce it allowed them, considering them too low and even confiscatory if involuntarily enforced. They apply on no other railroad in Florida. In 1928 and 1932 comparisons of these rates with other rates on logs and on similar traffic in the same and neighboring territories showed them to average less than half of most other comparable interstate and intrastate rates, and to be much the lowest of any of them. They are about one-half the rates fixed by the Interstate Commerce Commission for interstate traffic in the same logs in substantially the same territory. On the question of the cost of the service, figures were considered which showed the average cost of hauling logs over the Coast Line System; exact figures for the particular traffic in Florida not being available. But it appeared that the cost of the service in Florida was probably higher than elsewhere. It was found that there was no profit but an out-of-pocket loss to the carrier in the log traffic under these rates, not considering taxes and return on the investment, and that consequently there was no contribution to the maintenance of the-carrier as an efficient instrumentality of commerce, but a drain upon it. The total amount of this drain before 1929 was not found, nor could it be approximated from the evidence. But for the two years, 1929 and 1930, when the interstate rates fixed by the Interstate Commerce Commission were enforced, the log traffic under them was 18,602 ears and the the gross revenue from this intrastate traffic was $571,508.94, whereas if the Cummer Seale had been applied it would have been $281,225.75. Although the traffic fell oft greatly during this period, it is found to be more due to the universal depression in business and to the moving of mills to the timber than to the raise in rates, because there was no substantial increase after the Cummer rates were restored following the decision of the Supreme Court above referred to. Abundant available timber still exists in Florida, and is being rapidly reproduced, so that the future traffic will likely amount to at least 7,431 cars per year, and the average gross revenue on it under the new rates' will be more than $100,000 per year greater than the Cummer Seale would yield, thus converting a loss on the business into a profit of that approximate amount. As showing that the carrier as an instrumentality of interstate commerce cannot afford to absorb the loss under the Cummer Scale, or to forego the support to be derived from the new scale, it is found that the carrier’s net return on its investment is steadily falling from year to year, and in 1930 was only 2.54 per cent. On these findings the general finding was made that the Cummer rates are and in future will be unjustly discriminatory against interstate commerce, and that such unjust discrimination can and should be removed by rates not less than the scale prescribed for interstate commerce. Pending this litigation in October, 1932, the Commission reopened its order and took further evidence which showed that many voluntarily reduced rates had been established since the order by other carriers on low-grade traffic in raw materials comparable to "the log rates in dispute, in the western part of the southern territory and in southwestern territory. It found, and the evidence well warranted the finding, that the reductions were a temporary experiment made in the effort to recapture traffic which had been taken away by trucks, and generally the lowered rates carried an obligation that the manufactured article should also be moved by the carrier making the rate. The experiment has met with but little success. No such rates exist in the Florida territory here involved; nor is truck competition there such as to make unremunerative rates judicious as likely to improve net revenues. On January 9, 1933, the Commission reaffirmed its order of July 5,1932.
Conclusions of Law.
We are of opinion that the particular findings are sufficient to support the general finding of unjust discrimination by the state rates against interstate commerce by undue burden on the interstate carrier’s revenues, and to justify an order removing the discrimination by establishing the new rate prescribed.
The contention is vigorously renewed that the proceeding before the Commission *480never was one in which a burden by the state rates on the revenues of the carrier was made an issue, so that the Commission could properly so find and on that ground prescribe a state rate under section 13 (4) of the act. We adhere to the viexvs expressed in our former decisions, 30 F. (2d) 116; 31 F.(2d) 580. It is true that the Georgia Public Service Commission in its original complaint did not ask that the Florida state rates be raised, and it rather preferred that interstate rates should be lowered, but the complainant directly challenged the state rates, alleged that they caused a discrimination against interstate commerce within section 13 of the act, and prayed for its removal. The state of Florida was duly notified as required by that section, and on full hearing discrimination was found to exist and sought to be remove ed by prescribing a new state rate by virtue of section 13 (4). This court held that discrimination by revenue burden was within the ease before the Commission, and upheld the order on that ground only. The Supreme Court, 282 U. S. at page 209, 51 S. Ct. 119, 123, 75 L. Ed. 297, so far from disagreeing, said: “As the Florida Railroad Commission appeared in defense of the intrastate rates, and the railroad company, the rates of which were in question, and other parties in interest, both shippers and carriers, were heard, the question now presented relates to the substance of the determination of the Commission and its support in the evidence rather than to mere matters of pleading and procedure. In making its order, the Commission could exercise all the authority conferred by the Interstate Commerce Act for the purpose of removing such unjust discrimination as was found to exist. If the Commission had made adequate findings supported by evidence upon the point under consideration, we should not be disposed to conclude that the order must be upset because of the manner in which the proceeding was initiated or of the generality of the allegations of the complaint.” Much more forcibly do these words apply, now that the parties have had another full hearing upon this precise issue, with full knowledge that courts and Commission regarded that issue not only as present, but as controlling; the Commission having in due form found that the state rates do cause an unjust discrimination against interstate commerce by the very words of section 13 (4): “It shall prescribe the rate * * * thereafter to be charged * * * in such manner as, in its judgment, will remove such * * * discrimination.” It is the judgment of the Commission and not the wish or the prayers of the Georgia State Commission that is to determine what shall be done about the discriminatory state rate.
Early in the reopened proceedings before the Commission the complainants made a written demand on Atlantic Coast Line Railroad Company that it produce a statement supported by individual ear record movements, showing certain details as to ears of logs moving on its lines between points in Florida and Georgia for each of the years 1926, 1927, 1928, 1929, and 1930, a like statement concerning cars moving within the state of Florida for each of those years, and a statement showing the gross earnings from both interstate and intrastate shipments of such logs for each of those years. The railroad company in answer stated that it expected to furnish certain appropriate data about its log traffic, but could not get up the statements requested for lack of time and because its records did not show the distinctions in log traffic required. The railroad company did produce details of its log traffic since 1928, but not before. The Commission refused to compel further compliance. It will be noted that no specified books or papers were asked to be produced, nor any specified witness called on to tell what he might know. We are aware of no rule of law or practice which would require a litigant laboriously to compile information for his adversary, even if it were in his power to do so. Certainly it would lie in the discretion of the tribunal to decline to compel it. We find in such refusal no cause to upset an order founded on evidence which' was duly produced before that tribunal.
But it is said that the information demanded was essential to a finding of unjust discrimination, the revenue before 1929 under the state rates being one of the things mentioned by the Supreme Court as necessary to be established. We do not understand that the revenue, either gross or net, produced by the state rates must be exactly established, but only that the operation of those rates and their effect upon the carrier must be investigated and found. It was here established that the state rates produced a loss, and were a drain on the carriers. It might have been desirable to show the extent of the loss, but if that be impracticable, and if it appear that the loss will be in the future substantial and the carrier is not in position to absorb it without detriment to his service and support as an interstate carrier, a *481sufficient ease is made to find an unjust discrimination against interstate commerce, and to require its correction.
The ascertainment of the general fact of loss is said to be unlawful because the witnesses and the Commission dealt in part with the average costs of similar service over the Coast Line System and the general cost of hauling freight in the division which substantially embraces the state of Florida, rather than' the actual cost of hauling logs in Florida. But it was shown that the latter information could not be gotten; that the cost of service in Florida for reasons given was greater than elsewhere in the System, so that average costs for the System really showed a less cost than the Florida costs if they could have been separately ascertained. The difference in cost between hauling logs and other carload freight was also given attention. Not infrequently the best evidence obtainable has to be used as a basis for inferences, and conclusions of fact made therefrom with due allowance for possible inaccuracies are not invalidated because the best evidence logically possible was not at hand.
Appendix E of the report, entitled “Estimated Costs of Transporting Logs in Florida for the Average Distance of 81.36 miles based on A. C. L. Average Costs per Unit for Calendar Year 1929 Applied to the Average Units Involved in Hauling Logs in that State,” is attacked as being evidence considered by the Commission which was not introduced in the proceeding so that opportunity should be given to the parties to meet it, contrary to Interstate Commerce Commission v. Louisville & Nashville R. R., 227 U. S. 88, 33 S. Ct. 185, 57 L. Ed. 431. We do not understand the appendix to be evidence considered by the Commission. It is rather the Commission’s conclusion as to the cost of hauling logs in Florida for the distance shown to be the average under the Cummer Scale, based on the evidence which had been produced to it as tending to show such cost. So far from vitiating the order made it rather tends to show the care and discrimination with which .the inexact evidence of cost was examined and considered.
A contention strongly urged is that the direct prescription by the Interstate Commerce Commission of the intrastate rate is prima facie an unconstitutional invasion of the province of the state, so that the burden is on the defendants here to justify it before the court, and that in order to justify it the facts of justification, to wit, those showing the state rate to be an unjust discrimination against interstate commerce, must clearly appear to this court, the findings of the Commission not being conclusive, nor in themselves weighty on the very point of the Commission’s jurisdiction. It is not doubted that the power of the Commission to make an order is a judicial question, and that the court may examine it independently. When, however, the very fact upon the existence of which the power to act depends has been contradictorily tried before the Commission itself, its conclusion fully expressed upon its record affirming the existence of the fact is certainly sufficient to put the burden upon those who deny it. While at one time all findings of the Commission were declared by the statute to be only prima facie evidence of their correctness, that language has now been retained only with reference to money awards and to valuation of property by the Commission, and it' is well established that under the enlarged and positive powers with which the Commission is now vested its findings of fact within the scope of its powers will not be reviewed by the courts if supported by evidence. Merchants’ Warehouse Co. v. United States, 283 U. S. 501, 51 S. Ct. 505, 75 L. Ed. 1227. Where the matter examined relates, to its power to act at all the decisions are perhaps not so explicit, but we may refer to the following expressions of-the court as bearing directly .upon it: In I. C. C. v. Northern Pacific R. R. Co., 216 U. S. 538, 544, 30 S. Ct. 417, 418, 54 L. Ed. 608, it was said: “We are of opinion, then, that the Commission had no power to make the order if a reasonable and satisfactory through route already existed, and that the existence of such a route may be inquired into by the courts. How far the courts should go in that inquiry we need not now decide. No doubt, in complex and delicate cases great weight, at least, would be attached to the judgment of - the Commission.” In Interstate Commerce Commission v. Union Pacific R. R. Co., 222 U. S. 541, 547, 32 S. Ct. 108, 111, 56 L. Ed. 308, in discussing fundamental questions of the constitutional and statutory-power of the Commission, it was said: “In determining these mixed questions of law and fact, the court confines itself to the ultimate question as to whether the Commission acted within its power. * * * Its conclusion, of course, is subject to review, but, when supported by evidence is accepted as final; not that its decision, involving, as it does, so many and such vast public interests, can be supported by a mere scintilla of proof, but the courts will not examine the facts further than to determine whether there *482was substantial evidence to sustain the order.” In Interstate Commerce Commission v. L. & N. R. R. Co., 227 U. S. 88, 33 S. Ct. 185, 57 L. Ed. 431, the court held that the power of the Commission to'alter rates depended upon the fact of their unreasonableness, but that the Commission having found on evidence that they were excessive) its order was not to be disturbed. In United States v. L. & N. R. R. Co., 235 U. S. 314, 320, 35 S. Ct. 113, 114, 59 L. Ed. 245, the language is: “It is not disputable that from the beginning the very purpose for which the Commission was created was to bring into existence a body which, from its peculiar character, would be most fitted to primarily decide whether from facts, disputed or undisputed, in a given ease, preference or discrimination existed. * * * And the amendments by which it came to pass that the findings of the Commission were made not merely prima facie but conclusively correct in case of judicial review, except to the extent pointed out in the [Interstate Commerce Commission v.] Illinois Central [R. Co., 215 U. S. 452, 30 S. Ct. 155, 54 L. Ed. 280] and other cases, supra, show the progressive evolution of the legislative purpose and the inevitable conflict which exists between giving that purpose effect and upholding the view of the statute taken by the court below. It cannot be otherwise since if the view of the statute upheld below be sustained, the Commission would become but a mere instrument for the purpose of taking testimony to be submitted to the courts for their ultimate action.” We need not decide whether in this case the Commission’s finding of unjust discrimination is entitled to any less weight because it is a prerequisite of its jurisdiction as well as the meritorious basis for its exercise, because we have examined the evidence independently and are led to the same conclusion that the unjust discrimination exists.
In the evidence of lower voluntary rates recently made by other carriers in other territory we find nothing to require a different conclusion. A situation may thereby arise requiring inquiry as to other discriminations, but it throws little light on the revenue problem of the Atlantic Coast Line Railroad Company as an interstate carrier. If log traffic done in Florida on the Cummer Scale is at an out-of-pocket loss, the less of it done the better. The destruction of it would help by stopping a loss. If but a little business be done on remunerative rates so much profit would be substituted. The Commission has given full and expert attention to the situation, and has found that adherence to the level of log rates it has previously established as reasonable in interstate commerce and has applied as a minimum in intrastate commerce in Florida should be continued. We find no such plain case to the contrary as to warrant court interference. The findings and the evidence show the Cummer Scale of rates to constitute such a substantial revenue burden on the interstate carrier and on interstate commerce as to cause a discrimination against the latter and to give the Commission power to remove it under Interstate Commerce Act, § 13 (4). The action to be taken in removing it is left by the section to the judgment of the Commission. It having power in this case to prescribe a proper intrastate rate, its judgment as to the level of the rate to be established in order to accomplish the desired revenue result ought not to.be overridden when sustained by evidence and violative of no law. We uphold the orders of the Commission. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218946/ | AVIS, District Judge.
The bill in this cause is filed to restrain the defendant from continuing certain practices which plaintiff claims to be in violation of the Sherman Anti-Trust Act (15 USCA §§ 1-7,15 note) and also of the Clayton Act (38 Stat. 730).
The defendant is a New Jersey corporation, owning buses whieh it operates in interstate commerce between the state of New Jersey and the city of Philadelphia, via the Camden and Philadelphia bridge.
Plaintiff’s bill alleges, generally, that it is operating a fleet of eleven buses between the Fairview section of Camden, N. J., and Reybum Plaza, Philadelphia, and return, and has been so operating since September 9, 1932; that when it started operations the defendant already had a line of buses carrying passengers to and from Fairview and Philadelphia, engaged in interstate commerce. The bill alleges, and the evidence by ex parte affidavits shows, that when plaintiff started to run its buses it charged a fare of 10 cents per passenger each way in its first zone between Reybum Plaza and Ninth street and Kaighn avenue, Camden, and a fare of 15 cents each way to or from any place in its second zone between Rey burn Plaza and Fairview. At the beginning it also sold strip tickets, at following prices: In first zone 12 for $1; in second zone, 12 for $1.50. The individual charge was the same as charged by defendant, but defendant sold no strip tickets. Later, on October 7, 1932, plaintiff put into effect a new schedule of fares, charging 15 cents for a round trip to and from any point in its first zone, and 25 cents for the round trip in its second zone. The bill alleges that with this reduced fare, and the defendant not meeting the new rates, the plaintiff materially increased its business up to November 9, 1932.
It further appears by the bill and affidavits that, on this latter date, the defendant established a new rate, charging 10 cents for a round trip in the first zone and 20 cents for a round trip in the second zone. The bill alleges that this rate is charged only on directly competing lines; that on other lines of the defendant, it still adheres to the old higher rates; that the action of the defendant tends to a monopoly, and is otherwise in violation of the anti-trust laws above noted. The bill further alleges “wildcatting” and interference by buses of defendant with those of plaintiff, and that the effect will be to drive the plaintiff out of business, and stifle competition.
The plaintiff claims a right to relief by injunction under the provisions of section 16 of the Clayton Act (15 USCA § 26), the relative part of whieh reads as follows: “Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, including sections 13, 14, 18, and 19 of this chapter, when and under the same coitditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue.”
It will be observed that this section of the act authorizes relief “against threatened loss or damage by a violation of the antitrust laws,” and, under its provisions, plaintiff' claims the defendant has violated the second section of the Sherman Act (15 USCA § 2).
I have examined this act carefully, and the decisions thereunder, and have been unable to find any judicial construction applying to the facts in the instant ease.
All of the eases reported, where relief was granted, involve combinations held to be in restraint of trade, and tending to the detriment of the public, and in instances where the *484control was such as to indicate or show that the right to continue would permit the exclusion of competition. The operation of buses in interstate traffic is not controlled by any statutory provisions. The method of operation is over an interstate bridge, which is open to all upon payment of the toll charged. There could not be, in my opinion, any monopoly of the business, nor could action of defendant tend to monopoly, except by reason of the suggestion of counsel for plaintiff that the effort of the defendant is to so lower the fares as to drive the plaintiff out of busi- ■ ness, because of the inability of the plaintiff to meet the rates set by the defendant.
I am unable to conclude that a ease of this character comes within the provisions of section 2 of the Sherman Act. Section 1 of the act reads, in part, as follows: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” 15 USCA § 1.
The second section provides a penalty for certain acts applying to “every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations. * * * ” 15 USCA § 2:
It has been held that the second section is intended to reach the end prohibited by section one. If this is correct, although the individual or corporation would be guilty of a misdemeanor, it could only arise out of some combination in form of a trust or otherwise or conspiracy.
The only cases that we have been able to find which do not involve contract or agreement between different persons or corporations are United States v. Great Lake Towing Co. (D. C. N. D. Ohio, E. D.) 217 F. 656, and United States v. Eastman Kodak Co. (D. C. W. D. N. Y.) 226 F. 62, both being based upon consolidations of interest, or control of stock of other corporations conducting similar business, and acts thereunder which constituted the violation.
There is no suggestion of combination or control against the defendant in the instant case, but the claim is based entirely upon individual fare cutting, and claimed unfair operating tactics. I am convinced that section 2 of the Sherman Act (15 USCA § 2) does not apply, to the facts produced in the instant case.
The plaintiff claims relief also under the provisions of section 2 of the Clayton Act (15 USCA § 13), the pertinent part of which reads as follows: “It shall be unlawful for any person engaged in commerce, in the course of sueh commerce, either directly or indirectly to discriminate in price between different purchasers of commodities, which commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, where the effect of sueh discrimination may be to substantially lessen competition or tend to create a monopoly in any line of commerce.”
This section refers to “commodities” only. And although some courts have applied it to “service,” claimed by attorney for the plaintiff to be in the same class as furnishing transportation, I cannot so construe the word in that manner. In my opinion “commodities” is not applicable to transportation by buses, and consequently plaintiff is not entitled to relief under this section.
The prayer of the bill, in effect, is a request to this court to issue an injunction to fix a minimum rate of charge to be made for services performed in transportation of passengers in interstate commerce.
No ease has been referred to indicating that the court, in a proceeding of this character, has such power.
I do not believe that, under the law relied upon, this court has the authority to issue a restraining order, the effect of which would be to determine a rate to be charged.
A preliminary injunction should not be granted by a court of equity, unless the right to the relief is clear; and I am constrained to say that I am not satisfied that the facts and law are sufficiently clear to justify me in the issuance of such relief in the instant case.
In addition, I have considerable doubt as to the right of the plaintiff to relief, based upon the general equity principle of the acts and attitude of plaintiff. The plaintiff instituted the business of passenger transportation, in competition with the defendant, in September, 1932, and immediately made a reduction in the prevailing rates of fare; about a month later, and before the defendant had made any effort to meet the new rates, it made another and further reduction. To meet 'this competition, the defendant reduced its charges to a point which, the plaintiff says, it is not able to profitably meet.
The present suit is a personal one for the *485protection of the business of the plaintiff, and not for the benefit of the public.
I am convinced that the circumstances are such as to indicate that the reduced rates complained of are caused entirely by the action of the plaintiff, who is ashing for equitable relief.
The preliminary injunction is refused.
Supplementary Opinion.
This ease is submitted to the court on final hearing, by stipulation, upon bill and answer and affidavits, filed on motion for preliminary injunction. This motion was denied by the court, and the findings of fact and law are set forth in a memorandum, filed January 10, 1933.
Upon consideration of the ease as now presented, -my conclusion is that the bill should be dismissed for the reasons stated in the memorandum heretofore filed, and a decree will be signed accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218947/ | SCHOONMAKER, District Judge.
This is an ancillary receivership proceeding. The District Court of the United States for the Southern District of Ohio, Western Division, is the court of primary jurisdiction. On October 19, 1931, that court made an order directing all creditors of the defendant to file their claims with the domiciliary receiver. This court, on November 4, 1931, made an order similar.
On November 9, 1931, the Ohio District Court made an order directing the sale in Cincinnati on November 30, 1931, of substantially all of the assets of the defendant, as a whole, by the primary receiver. A similar order was made by this court on November 13, 1931.
This sale was made and the proceeds paid into the hands of the primary receiver. The report of the sale was confirmed by the court of primary jurisdiction, and then a similar report by the ancillary receivers was confirmed by this court on December 9, 1931.
According to the first and final account of the ancillary receivers filed in this court on, February 23, 1932, the total assets which came into the hands of the ancillary receivers consisted of property inventoried and appraised at $5,835.86, and income received during the operation by the receivers of $4,-159.25, making a total of $9,995.11. They claimed credit for the amount of the inventory, $5,835.86, which was included in the sale of assets, as a whole, by the primary receiver, so that practically the only moneys in the hands of the ancillary receivers were the receipts from income of $4,159.25. Their disbursements for operating expenses were $3,113.83, leaving a balance in the hands of the ancillary receivers, at the date of filing their account, of $1,045.42.
The Manchester Auto & Machine Company filed exceptions to the credit of $5,835.-86, claimed by the ancillary receivers by reason of the sale of these assets by the primary receiver in his sale of the assets as a whole; and also excepted to the failure of the ancillary receivers to set forth specifically the proceeds of the sale of assets which were located at premises No. 916 to 924 Manchester boulevard, Pittsburgh, Pa., which the Manchester Auto & Machine Company had leased to the defendant.
On January 23, 1932, the Manchester Auto & Machine Company filed in this court a *486rent claim of $3,500, alleged to be due that company under the terms of the lease dated July 28, 1930, between that company and the defendant, whereby the Manchester Auto & Machine Company leased to the defendant the western section of building located at Nos. 916 to 924 Manchester boulevard, Pittsburgh, Pa., being 70 feet wide and 100 feet long, for the term of two years, commencing October 10, 1930, and ending October 10, 1932, at a total rental of $8,400, payable in advance at the rate of $350.
The lease further provided as . follows: “It is further agreed that if * * * a receiver be appointed for tenant, then and in such ease the entire rent for the balance of said term shall, at the option of the lessor, at once become due and payable, as if by the terms of this lease it were all payable in advance; or at the lessor’s option, this lease shall become null and void.”
The ancillary receivers went into possession of the leased premises, and occupied them until December 7, 1931, and paid all rent due thereon up to that time.
The receivers are contesting the allowance of this rent claim by this court, because: (1) They aver that the Manchester Auto & Machine Company accepted a surrender of the lease. (2) This rent claim should, under the order of this court and that of the primary jurisdiction, be presented to the court of primary jurisdiction for adjudication. (3) There is no way now of determining the sale price of distrainable goods that were on the demised premises and.included in the lump sale of the assets of defendant in the court of primary jurisdiction.
The court heard the testimony offered by the parties. The question involved is one of Pennsylvania law; and, while we might properly leave the claimant to present its claim in the court of primary jurisdiction, Superior Cabinet Corp. v. American Piano Co. (D. C.) 39 F. (2d) 87, as provided for in the original orders made both in this court and that of the primary jurisdiction, we have concluded that we should, for the convenience of the parties here, pass on the single question of whether the Manchester Auto & Machine Company has, in fact, any legal claim for the balance of rent accruing after the date the ancillary receivers surrendered possession of the leased premises.
We have carefully considered the testimony offered on both sides, and find, as a matter of fact, that the Manchester Auto & Machine Company resumed possession and occupancy of the leased premises on and after December 7, 1931, the date of surrender by the receivers, and used the same for its own purposes. This fact resolves the case against the claimant. It is well-settled law that a landlord who accepts surrender of a lease cannot claim for rent thereafter accruing. Wilson v. Pennsylvania Trust Co. (C. C. A.) 114 F. 742; Re Winfield Mfg. Co. (D. C.) 137 F. 984; Re Graebing Drug & Distributing Co. (D. C.) 1 F.(2d) 397.
The rule to show cause granted on the petition of the Manchester Auto & Machine Company will therefore be discharged. An order may be submitted accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218948/ | JOYCE, District Judge.
The above-entitled action at law was tried before the court pursuant to a ‘special setting thereof commencing on the 6th day of July, 1932, the parties having by stipulation waived trial by jury and agreed that the issues should be submitted to the court for determination. There were the following appearances: Messrs. Doherty, Rumble, Bunn & Butler for the plaintiff; and Mr. Lewis L. Drill, United States District Attorney, and Mr. M. W. Goldsworthy, Special Attorney, Bureau of Internal Revenue, for the defendant.
This is a suit brought by the plaintiff as surviving executor of the estate of Fred H. Stoltze, deceased, seeking to recover an alleged overassessment and overpayment of estate tax in the principal amount of $126,108.-33 and interest of $12,606.99, or a total of $138,715.32, upon which the plaintiff seeks interest from April 13, 1931; this being the date of payment of the deficiency assessment in question.
The defendant prays that the plaintiff take nothing, that his complaint be dismissed, and asks such other relief as may be appropriate in the premises.
From the admissions contained in the pleadings or made in open court, and from the evidence adduced on trial I find the following to be the facts:
I. Plaintiff is surviving exeentor of the estate of Fred H. Stoltze, deceased. Defendant is, and at the dates herein mentioned was, collector of internal revenue for the district of Minnesota.- Fred H. Stoltze, a resident of Hennepin county, Minn., died May 21, 1928, leaving a last will and testament, which was admitted to probate by the probate court of said county on June 18, 1928. John R. Stoltze (the plaintiff) and Hovey C. Clarke, named in said will as executors, were thereupon appointed as such by said probate court and immediately qualified. Said Hovey C. Clarke died on April 10, 1931. Thereafter, on June 30, 1931, an order was duly entered by said probate court whereby, among other thing-s, John R. Stoltze (the plaintiff), as surviving executor, was authorized to continue the administration of said estate of Fred H. Stoltze to completion. Said administration is still pending uncompleted in said probate court. (Admitted in amended answer.)
II. Said Fred H. Stoltze left personal property subject to probate and subject to estate tax, of the value at the date of his death of (gross) $1,425,526.57. (Admitted.)
III. Said Fred H. Stoltze had likewise prior to his death made four certain gifts of property as follows:
Item 1. On March 30, 1927, he gave forty-nine shares of the capital stock of F. H. Stoltze Securities Company (a corporation) to John R. Stoltze. John R. Stoltze is the only son of Fred H. Stoltze. The value of said stock at the date of death of Fred H. Stoltze was $972,670.58.
Item 2. On March 30, 1927, he gave two shares of the capital stock of F. H. Stoltze Securities Company to Grace B. Stoltze. Said Grace B. Stoltze is the wife of John R. Stoltze. The value of said stock at the date of death of Fred H. Stoltze was $39,700.84.
Item 3. On April 15, 1927, he gave to John R. Stoltze $250,000 face amount of accounts receivable due. him from State Lumber Company, a corporation. The value of said accounts at the date of death of Fred H. Stoltze was $250,000.
Item 4. On May 5,1927, he and the other stockholders of F. H. Stoltze Securities Company caused said corporation to transfer to-Mrs. Maud A. Chadwick 500 shares of the-preferred stock of United States Steel Corporation owned by it. Mrs. Maud A. Chadwick is the sister of the deceased wife of Fred H. Stoltze. The value of said stock (ex-dividend) at the date of death of Fred H. Stoltze was $72,125, and a dividend amounting to $875 had theretofore been declared on it, making a total value, including said dividend, of $73,000.
(All in dispute except as to the deliveries.)
Said gifts were in each ease by outright conveyance, and took effect in possession and enjoyment forthwith on their several dates.
IY. Said Fred H. Stoltze was not in contemplation of death at the time any of said four gifts were made.
None of said four gifts was made by him. in contemplation of death.
*488The three gifts to John R. Stoltze and his wife (items 1, 2, and 3) were made simultaneously with the return of John R. Stoltze to Minneapolis and with his assumption of important responsibilities in the conduct of his father’s business, and were made, on account of that return, to give the son an interest or stake in the business he was to manage, and to insure his continued interest in it. A subordinate purpose of these gifts was to divide the property and its income among three taxpayers and so to reduce the total income taxes payable on account of it.
The fourth gift, to Mrs. Maud A. Chadwiek, was made by Fred H. Stoltze in order to carry out the wishes of his wife, then recently deceased, who was Mrs. Chadwick’s sister, and to insure to Mrs. Chadwick an'immediate income. (Disputed.)
■ V. On or about February 1, 1929, the executors filed their return for federal estate tax. In said return they did not include the value of the four gifts above stated in the gross estate or in the net estate, but they reported that they had been made, and in that connection made in said return the statement set out in paragraph V of the complaint. (See Plaintiff’s Exhibit 1.)
VI. After the filing of said return, the same was the subject of audit and investigation in the Treasury Department and of conference between'that Department and the representatives of the estate. Agreement was reached as to the value of the property passing under the will (which was correctly fixed at $1,425,526.57, gross); as to the values of the properties transferred by the four gifts (which were correctly fixed at the figures stated in paragraph III of these findings); and as to the amount of the allowable deductions from the gross estate (which were correctly fixed at $118,277.22 total). The Commissioner of Internal Revenue determined, in accordance with section 302 of the Revenue Act of 1926 (26 USCA § 1094), that the value of the four gifts mentioned should be included in the gross estate. The executors declined to accede to that determination. This was the only outstanding difference between the parties. Accordingly a “closing agreement” under seetipn 606 of the Revenue Act of 1928 (26 USCA § 2606) was prepared, was sighed on December 8, 1930, by the executors, and on February 17,1931, by the Acting Commissioner of Internal Revenue, and- was approved by the Secretary of the Treasury on February 17, 1931.' A correct eopy of said closing agreement is set out in paragraph VI of the complaint. It fixed the total estate tax at $199,188.28, subject to (1) a credit of not to exceed 80 per cent, thereof for state estate, inheritance, legacy, or succession taxes paid; and (2) the executors’ contention, which was saved, that the tax was excessive by so much of the amount fixed as resulted from the inclusion of the four gifts mentioned in the gross estate. (Not admitted on pleadings, but no substantial dispute as to what happened. See Plaintiff’s Exhibits Nos. 2, 3, 4, 5, 6, and 7.)
VII. Following the determination mentioned in the last paragraph, the Commissioner of Internal Revenue, on or about March 7, 1931, assessed deficiency federal estate tax against the said executors in the principal sum of $125,725.48 (being said total estate tax of $199,188.28 found by him less assessments theretofore made), and also assessed interest on the said $125,725.48 from May 21, 1929, to January 21, 1931, in the sum of $12,606.99, aggregating $138,332.47. On-or about March 14, 1931, the defendant served on the plaintiff defendant’s notice and demand for payment of said deficiency tax, and on April 13, 1931, the plaintiff paid the same to the defendant, under protest, in the amount last stated. (Admitted in amended answer.)
VIII. Pending the proceedings described in the last two paragraphs, the Minnesota inheritance tax payable on account of said estate was determined by said probate court to be the sum of $53,151.23, which amount was paid by the said executors to the treasurer of Hennepin county, Minn., and appropriate proof thereof filed with the Treasury Department. Thereafter, and in the month of July, 1931, the Commissioner allowed credit for said payment, and so advised the plaintiff.
Thereafter, and after the commencement of this action, the state of Minnesota assessed additional estate tax against the said estate in the sum of $5,312.73, which was paid by the plaintiff December 2,1931. Plaintiff filed claim for credit of that amount against the federal tax and refund) which was allowed and refund paid. The total credit under the law for state inheritance and estate taxes paid was therefore $58,463.96, which has been allowed. (Not formally admitted; no substantial dispute. See Plaintiff’s Exhibits 8 and 9.)
IX. Estate tax has been assessed by the Commissioner of Internal Revenue against the said estate as follows:
February, 1929, P. 300, L. 7 (Principal).... $ 70,627.89
January, 1930, P. 300, L. 7 (Principal)...... 2,834.91
March, 1931, P. 300, h. 0 (Principal)........ 125,725.48
March, 1931, P. 300, L. 0 (Interest)......... 12,606.99
June, 1931, P. 300, U. 1 (Interest)........... 409.15
Total Assessments....................... $212,204.42
*489Against said assessments certificates of overassessment have been issued as follows:
Schedule MTB. 7045 (Minnesota inheritance tax) .........................................$53,151.23
Schedule MTB 9006 (Minnesota estate tax, $5,312.73; and interest adjustment, $196.-67) ........................................... 5,509.40
Total Oyerassessments Certified.........$58,660.63
Tbe total net assessment of estate tax (including interest) made is therefore $153,-543.79, of which $140,724.32 is principal and $12,819.47 is interest. (No dispute as to facts, though not formally admitted. See Plaintiff’s Exhibits 8 and 9.)
X. The exeentors of the said estate, and the plaintiff as surviving exeeutor, have paid to the defendant on account of estate taxes assessed the following sums:
Date of Payment Amount Paid
May 17, 1929 (on returned tax)..............$ 14,125.58
May 17, 1929 (deficiency assessment)....... 2,834.91
April 13, 1931 (deficiency assessment, principal) ...................................... 125,725.48
April 13, 1931 (deficiency assessment, interest) ......................... 12,606.99
June 3, 1931 (balance returned tax, principal) ...................................... 3,351.08
June 3, 1931 (balance returned tax, interest) ................ 409.15
Total Estate Taxes Paid................$159,053.19
Against said payments there has been refunded to the plaintiff, on account of credit for said Minnesota estate tax ($5,312.73) and interest adjustment ($196.67), the sum of $5,-509.40.
The net total estate taxes paid is therefore $153,543.79, being the same amount as the total net assessment. Of said net payments $140,724.32 were principal and $12,819.47 interest. (No formal admission, though substantially admitted. See Plaintiff’s Exhibits 9,10,11,12, and 13.)
XI. If tbe values of the said four gifts are excluded from the gross estate, the estate tax (principal) properly assessable is. $14,-615.99, calculated as follows:
Value of gross estate, excluding four ‘ transfers .................................$1,425,526.57
Total deductions............................ 118,277.22
Net estate for tax......................$1,307,249.35
Gross estate tax on this amount..........$ 73,079.95
Credit for Minnesota taxes paid.......... 58,463.96
Estate tax..............................$ 14,615.99
The principal amount of estate tax assessed and paid was therefore (on the assumption stated) excessive as follows:
Principal assessed and paid................$140,724.32
Principal assessable......................... 14,615.99
Principal overassessed and overpaid... $126,108.33
On the same assumption, the interest assessed in March and paid in April, 1931, in the sum 'of $12,606.99, was neither assessable nor payable, for the reason that the deficiency assessment of principal made at the same time and on which the interest was calculated was itself not assessable; tbe total tax payable being more than covered by assessments theretofore made.
If tbe four gifts are excluded, therefore, tbe total «verassessment and overpayment of estate tax is:
Principal ....................................$126,108.33
Interest ...................................... 12,606.99
$138,715.32
—on which the taxpayer would he entitled to interest from April 13,1931, the date of payment of the deficiency assessment in question. (In substance a compilation, exeluding the four gifts.)
XII. On or about April 22, 1931, the plaintiff filed with the defendant a claim for refund of the part of the estate tax resulting from the inclusion of said four gifts in the gross estate, in the aggregate sum of $138,715.32. A true copy of said claim is set out in paragraph XII of the complaint. On September 14, 1931, the Commissioner of Internal Revenue rejected the said claim in its entirety. This action was instituted within six months thereafter. (Not in substantial dispute. See Plaintiff’s Exhibit 14.)
On the foregoing findings of fact I make the following conclusions of law:
I. That so much of section 302 of the Revenue Act of 1926 as provides that said four gifts “shall be deemed and held” to have been made in contemplation of death, notwithstanding the facts are to the contrary, operates to deprive the plaintiff of his property without due process of law, in violation of the Fifth Amendment to the Constitution, and is therefore void.
II. That none of said four gifts should have been included in the gross estate for the calculation of estate tax.
III. That the plaintiff is entitled to judgment against the defendant in the sum of $138,715.32, with interest at 6 per cent, from April 13,1931, until paid. Judgment will he entered accordingly.
To all of which an exception is accorded the defendant.
Memorandum.
As I view it, there is necessary to be considered the question as to whether the gifts involved in this controversy were made by one *490capable of making them, were made outright, were intended to and did take effect at once, and were absolute. If so, they are taxable only if made “in contemplation of death.”
The tax in question is levied by section 302 (c) of the Revenue Act of 1926 (26 USCA § 1094 (c), as follows:
Section 302: “The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated— " * *
“(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money’s worth. * * * ”
See in this connection Treasury Regulation No. 70 reading as follows: “Art. 16. Nature of Transfer. — The words fin contemplation of death’ do not mean, on the one hand, a general expectation of death such as all persons entertain, nor, on the other, is the meaning limited to an expectation of immediate death. A transfer, however, is made in contemplation of death wherever the person making it is influenced to do so by such an expectation of death, arising from bodily or mental conditions, as prompts persons to dispose of their property to those whom they deem proper objects of their bounty. Such a transfer is, taxable, although the decedent parts absolutely and immediately with his title to and possession and enjoyment of the property.”
Further provisions of section 302 (c) provided that all gifts in excess of $5,000 in valpe and made within two years prior to déajli .'“shall be deemed and held to have been'made in contemplation of death within . the meaning of this chapter.” This conclusive presumption was held void by the Supreme Court of the United States in Heiner v. Donnan, 285 U. S. 312, 52 S. Ct. 358, 76 L. Ed. 772. Prior to 1926, the Revenue Acts contained provisions that all gifts of a material amount, made within two years of death, shall be deemed to have been made in contemplation of death, “unless shown to the contrary.” This prima facie assumption was of course valid. However, by. the aet of 1926 it was made applicable only to gifts made prior to the enactment of such aet (section 302 (c), third sentence); gifts subsequent to the enactment of the aet being eov'ered instead by the conclusive presumption now declared to have been unconstitutional. The gifts under consideration in this case were made after the act of 1926, and therefore on the face of the aet not subject to any presumption. It may be assumed, however, that, since the act of 1926 was an amendment of the prior aet, its invalidity might leave the old law in effect and the prima facie assumption operative. The plaintiff, therefore, would have the burden of proof which fixes the duty of producing some evidence to the contrary and which when done the inference ends and the question of fact arises under all of the evidence. See Flannery v. Willcuts, 25 F.(2d) 951 (C. C. A. 8th), and the cases therein cited. See, also, Wickwire v. Reinecke, 275 U. S. 101, 48 S. Ct. 43, 72 L. Ed. 184; Neal v. Commissioner of Internal Revenue, 53 F.(2d) 806 (C. C. A. 8th).
We now. have before us the applicable statutes, the determination of where rests the burden of proof, and there is then approached a consideration of whether or not the four gifts made by Fred H. Stoltze, first, were actually made, were capable of being made, and were intended to and did take effect at once; and, second, if so made, were such gifts made by Stoltze in contemplation of death. My consideration of the 'evidence suggests an affirmative answer to the first question and a negative answer to the second.
.There is much to support the conclusion, in my opinion, that the division of the Stoltze Securities Company stock by the gift to John R. Stoltze and his wife, Grace, leaving after such gifts 49 per cent, in Stoltze, 49 per cent, in Stoltze, Jr., and 2 per cent, in Grace Stoltze, his wife, was deliberate and actually consummated, and by one qualified to make such division. I do not understand that the delivery of the gifts is questioned. The accounts of the father and John R. Stoltze and his wife were set up on the books of F. H. Stoltze Securities Company, which was organized in 1924 and which held the securities of the Stoltze Companies, as well as those of other companies in large quantities; all of the stock of the Securities Company being owned by F. H. Stoltze until the making of the division in question in March, 1927. The detail of earnings on these gifts is shown in Plaintiff’s Exhibits 52-A, 52-B, and 52-C, taken from the F. H. Stoltze Company books. Defendant’s Exhibit A-7 is a photostatic copy of the original and amended income tax return for the calendar year 1927 filed on behalf of John R. Stoltze. The dividends received by the son on his 49 per cent, of the *491Stoltze Securities stock, shown on Exhibit 52-B, are reflected on the third page of the income tax return, and it appears that, after the gifts were made, the son and his wife were treated as stockholders of the Stoltze Securities Company. No question arises as to the earnings, the method of their recording, or their return on form 1040.
Plaintiff’s Exhibit 75, being a stipulated extract from a journal from the State Lumber Company, reflects the personal accounts of E. H. and John R. Stoltze following the gift to the latter on April 15, 1927, of $250,-000 face amount of accounts receivable due the father from the State Lumber Company, and substantiates the transfer as claimed.
The Chadwick transaction involving the gift to Mrs. Maud H. Chadwick of 500 shares of preferred stock of U. S. Steel on May 5, 1927, was pursuant to what was apparently a desire entertained for some time by P. H. Stoltze to provide Mrs. Chadwick with a fixed income; she being a sister of his deceased second wife. He so told Mrs¡ Chadwick’s husband on his way home from the South while in Chicago, where the Chad-wicks lived. I doubt if in the state of the record serious objection will be urged as to the integrity of this transaction.
It is to be noted in connection with the accounts of the various companies controlled by E. H. Stoltze that they were kept in a manner as best suited Mr. Stoltze’s convenience and views. Many highly important transactions were merely noted on cards showing the date of acquisition of the securities, dividends received, date when sales were made, and many carry on their faee indorsements to the effect that the stock was carried in the name of E. H. Stoltze Securities Company. I think they are sufficient to show the manner whereby the business was conducted, and there is other supporting evidence which leads to the conclusion that the Stoltze Securities Company had large assets and its stock possessed the substantial value disclosed in the findings of fact. It might be suggested that as to enterprises so extensive! such holdings merited a more comprehensive system of bookkeeping, but those familiar with the accounts who testified at the hearing had no difficulty in explaining, not only the book entries but the significance of the card exhibits. The method appears to have been fully sufficient. We must take the situation as it existed throughout the period affected by this litigation.
An outstanding case in which the subject “contemplation of death” is discussed is United States v. Wells, 283 U. S. 102, wherein the court at page 117, 51 S. Ct. 446, 451, 75 L. Ed. 867, said:
“As the transfer may otherwise have all the indicia of a valid gift inter vivos, the differentiating factor must be found in the transferor’s motive. Death must be ‘contemplated,’ that is, the motive which induces the transfer must be of the sort which leads to testamentary disposition. As a condition of. body or mind that naturally gives rise to-the feeling that death is near, that the donor' is about to reach the moment of inevitable-surrender of ownership, is most likely to-prompt such a disposition to those who are deemed to be the proper objects of his bounty, the evidence of the existence or nonexistence of such a condition at the time of the gift is obviously of great importance in determining-whether it is made in contemplation of death: The natural and reasonable inference which may be drawn from the fact that but a short period intervenes between the transfer and death is recognized by the statutory provision creating a presumption in the case of: gifts within two years prior to death. [The Wells ease arose under an application of the provisions of the Revenue Act of 1918, 40 Stat. 1057-1097.] But this presumption, by the statute before us, is expressly stated to be-a rebuttable one, and the mere fact that death ensues even shortly after the gift does not determine absolutely that it is in contemplation of death. The question, necessarily, is as to the state of mind of the donor.
“As the test, despite varying circumstances, is always to be found in motive* it cannot be said that the determinative motive is lacking merely because of the absence of a consciousness that death is imminent. It is contemplation of death, not necessarily contemplation of imminent death, to which, the statute refers. It is conceivable that the idea-of death may possess the mind so as to 'furnish a controlling motive for the disposition of property, although death is not thought to-be close at hand. * ® *
“The words ‘in eonteiiiplation of death’ mean that the thought of death is the impelling cause of the transfer, and while the belief in the imminence of death may afford convincing evidence, the statute istnot to be' limited, and its purpose thwarted, by a rulo of construction which in place of contemplation of death makes the final criterion to be an apprehension that death is ‘near at hand.’ * #
“It is sufficient if contemplation of death. *492be the inducing cause of the transfer whether or not death is believed to be near.”
See, also, Flannery v. Willcuts, supra, and authorities therein cited, and Rea v. Heiner (D. C.) 6 F.(2d) 389, 392, which latter case involved the assessment of taxes under section 402, par. (c) of the Revenue Act of 1918 (40 Stat. 1097) and wherein there was noted with "approval as follows: “ 'It is only when contemplation of death is the motive without which the conveyance would not be made, that a transfer may be subjected to the tax.’ That is, the expectation of death must be the direct, specific, and immediate animating cause of the transfer.”
If a present apprehension of death induced from some existing bodily or mental condition be absent, “there is not that contemplation of death intended by the statute, especially when another adequate motive actuating the gift is shown.” Rea v. Heiner, supra.
The foregoing are the legal principles as I see them applicable to this branch of the ease. It becomes necessary to apply them to the evidence.
Fred H. Stoltze died on May 21,1928, age sixty-nine years. He survived two wives; his second wife having died February 12, 1927, following a lingering illness. He was apparently greatly devoted to Mrs. Stoltze, and her death brought him deep grief. He had been a man of great physical strength and mental vigor. He wás dominant, arbitrary, unreasonable, and highly successful in business. He had acquired a large fortune in various milling, lumber, and land enterprises and investments. He undertook to exercise a personal control over all of his interests with the executive assistance of a trusted employee named Landmark, who by some witnesses has been described as a chief' clerk and by others as a confidential assistant or secretary. In any event, Landmark filled an important and vital status in the Stoltze scheme of affairs, scattered as their interests were. Landmark had been with Stoltze for many years, and in the disposition of many matters exercised complete discretion.
John R. Stoltze was an only son by the first wife. The son married in 1921, following which he lived for some eight years in Shreveport, La., where he was engaged in the oil business, but in which his father had no interest, nor did he then have monetary interest in the father’s affairs. In fact, it .appears that at such time the father and son did not get along well.
F. H. Stoltze for many years had been afflicted with interstitial nephritis. He had an attack early in 1925 of neuritis in his left leg, which finally attacked the other leg. For various periods he had been a sufferer from various ailments. The testimony discloses that from at least 1918 until his death he suffered from diabetes and took insulin for its relief; that early in 1925, following painful periods, he sought medical relief at Rochester, Minn., and in June of that year he there submitted to an operation involving the severing of the sensory nerve in his leg, which he regarded as a serious operation, but which greatly relieved his physical condition and led him to believe, from what his doctors told him, that his future relief was insured from the distress theretofore undergone, and that he would get well, though the operation in a measure crippled him and somewhat retarded his physical activities.
The record discloses no other period or condition until his last illness suggesting that he might have reasonably feared death as being a likely consequence of his condition, and it seems somewhat significant that at such time there is no evidence that he considered the making of, or that he made, any gifts or other disposition of his large properties. The testimony of Dr. McFarland, who attended Mr. Stoltze in 1918 and thereafter, and who had been associated with Dr. Nippert, deceased, at the time of the trial, and who had been Mr. Stoltze’s regular physician, showed that their office record disclosed no complaints of pain or trouble after the administration of heavy sedatives following his return from Rochester in 1925 until September, 1927. The doctor stated that on April 7, 1926, Stoltze’s blood pressure was 170-90, and a urinalysis disclosed he was sugar free. On September 8, 1927, he had neuralgic pains in his leg; his blood pressure was 160-95, and there was then an absence of sugar and pus in the urinalysis. The next day he was, as the doctor said, “O. K.” On October 28, 1927, a urinalysis disclosed an even better situation, and from October 28,1927, to February 13, 1928, there are no book entries in the doctor’s records.
In 1925, when the father had been ill in Rochester, the son came from the South to see him, and found both the father and stepmother ill. In the fall of 1926 he came to Minneapolis to visit his parents. He testifies that he had made up his mind to come North —probably on the tentative suggestion theretofore made by the father that he come back to assist in the father's business. It is important to note at this point that in 1924 the *493father was still actively carrying the heavy responsibility of his business, and that in May of that year, when returning from a visit to one of his Montana milling enterprises, he expressed the hope to Mr. Arthur Langley, an insurance engineer who made the trip West with him, that “he wished Jack (his son) were back to take over the work we were doing.” This is the first time, so far as the evidence discloses, that he felt the need of his son’s co-operation and presence. This was about two years before Landmark’s death and four years before Stoltze’s death. Again in May, 1926, in another conversation with the same witness regarding insurance affairs, he told Langley with reference to some matter wherein his decision was sought by Langley “that Jack would be back and the matter in question would be taken up by him.”
When Landmark died in 1926, it took a trusted and active aid out, of the Stoltze organization, and it became important, if not absolutely necessary, that somebody take on added responsibilities, and immediately the son was inducted into the business and started to work for the F. H. Stoltze Land Company as well as various of the lumber enterprises. As fast as he familiarized himself with the business, there were additional responsibilities assumed. In certain of the enterprises the young man was given shares of stock to permit of his becoming a director, and the gifts in question made to him and his wife had as their underlying motive and purpose, as I view it, a desire to get the son back to assist him in the management of six or seVen large going enterprises, the idea and plan for which he had expressed two years before. In this connection, as disclosing motive, it is important to keep in mind the testimony of witness Doney, who did tax work for Stoltze, Sr., who stated that F. H. Stoltze in December, 1926, told him that he wanted to give Jack a substantial interest in the business “so Jack would be justified in coming.” It appears that the father wanted to impress upon the son that his responsibilities and obligations were to be large and important. There was then present also the natural desire for the society of the son and his family, towards whom he evidenced devotion and affection.
After he recovered from the shock of his wife’s death in February, 1927, the testimony shows that Mr. Stoltze was interested in the general news, market quotations, horse racing, bridge, as well as his business affairs; that he possessed a good appetite, and while he had a prescribed diet he paid no attention to it, overate, and did about as he pleased. In brief, for one of his temperament he acted in a natural manner. The Rochester operation had left a lameness which required the use of a cane, and certain physical conditions required that assistance be rendered him, such as getting in and out of his auto and in and out of the bathtub. He was not a well man, but his great physical strength did not leave him easily, and he still possessed a vigorous and decisive mentality, and, while unreasonable and arbitrary, he still successfully carried on his business affairs, and nothing is there to indicate that his attitude towards his numerous and scattered enterprises, their operation and control, in any manner suggested his belief that death was approaching — near or distant. In the summer of 1927 he decided to go into the business of raising orchids on a large scale. He converted his extensive home gardens and greenhouses for that purpose, and undertook the propagation of these flowers, which the evidence shows take four or five years to mature from seedlings, a fact which it may be presumed he knew. In 1927 he had his dentist make him another set of false teeth, though the set which he had made in 1925 was apparently still satisfactory. He traveled much, and, while no longer able to hunt or play golf as had been his custom, he did retain his interest in outdoor affairs. His chauffeur, who worked for him since April, 1926, testified that he would go to his office about 9:30 in the morning, leaving about noon. After lunch he would either return to the office or go to his club. That' he would be called for between 5:30 and 6. That he had little difficulty in getting about. That he enjoyed fishing and outdoor life. That'he took numerous walks with his son, and that the course of conduct outlined in 1926 with reference to his physical movements was substantially the routine followr ed in 1927 when he went to Florida, from where on his return he made the gifts in question. In August of that year he went to Wisconsin on an outing, where he fished every day, weather permitting. That he played bridge every evening until about 10 o’clock on this trip. The witness Goetz, at whose home he stayed on the trip, stated that aside from his bereavement he regarded him as normal in mental attitude. He continued his bridge activities at his home on his return, and derived great enjoyment therefrom, though he dictated the rules and methods to be adopted by the other players. His grandchildren were of great interest to him, as were general .business conditions, and he continued to assert his interest in agriculture and flow*494ers. Apparently throughout this period he was not disturbed as to his future well-being. His actions would seem to indicate that he felt that the operation in 1925 at Rochester had realized the hopes his doctors then expressed.
No question exists that in his last illness, culminating in his death in May, 1928, nurses and doctors were in attendance and that he suffered acutely. In March of that year he told one nurse that she would have to get a new job, as he was going to have a funeral. The expressions then made by him as disclosing his then appreciation of his condition were at least a year after the making of the four gifts in question. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218949/ | HINCKS, District Judge.
The gas screw yacht Nightingale was seized by the United States under libel charging violation of sections 584, 593, and 594 of the Tariff Act of 1930 (19 USCA §§ 1584, 1593, and 1594), and under sections 4377 and 4214 of the Revised Statutes (46 USCA §§ 325 and 103). Thereafter the vessel was appraised at $6,000 and released to the claimant upon a bond in the amount of $6,000, executed by the claimant and the Greater City Surety & Indemnity Corporation, who is the petitioner herein, as surety, upon condition that, “if judgment passes against the claimant as to the whole or any part of said vessel, and the claimant does not, within twenty days thereafter, pay into the court the amount of the appraised value of such vessel, or such sum as the court may decree, with costs, judgment shall be granted on this bond, on motion in open court, without further delay.” ■
Thereafter a judgment of condemnation and forfeiture of said yacht, her tackle, apparel, furniture,-and cargo was duly entered, requiring the Marshal to sell the same, “or in lieu thereof to accept the appraised value of the same.” The Marshal thereupon made inquiry of the claimant as to whether it would surrender the vessel or pay its bond, whereupon the vessel was returned, but in a stripped condition, much of its motor mechanism having been removed. Thereafter, promptly upon notice of this shortage in equipment, the district attorney instructed the Marshal to withhold sale of the vessel and, pursuant to this instruction, the vessel has remained in the custody of the government ever since, and, so far as the record discloses, without demand from the claimant or his surety. The district attorney promptly advised the claimant of the condition in which the vessel was returned, adding that, “under the circumstances you realize that what Was returned does not constitute a return of the boat as called for by law, and it is therefore our intention to proceed immediately to forfeit the bond which was furnished in this case.” Thereafter, “a judgment on the bond” was duly entered in this court, ordering that judgment be entered for the United States to collect the bond of $6,000, with costs, theretofore given as above set forth for the release of the boat. It is this judgment which the petitioner seeks to set aside by the pending petition.
The precise grounds upon which the petitioner bases, its claim for relief are not set forth in its moving affidavit. From its brief, *495however, it appears that the petitioner’s claim is based upon the contention that, under the bond, which was given pursuant to 28 USCA § 751, the obligors (that is, the claimant and his surety who is the petitioner herein) were under obligation only to return the vessel or, at most, to make good the difference between the stipulated value of $6,-000 and the value of the boat in its stripped condition when returned. The claim is also made that the original decree ordering the Marshal to sell the vessel, or in lieu thereof to collect the amount of the bond, gave the claimant and his surety an option as to whether they would return or pay. The claim is also made that the United States and its attorney are estopped to claim under the bond under the facts set forth above.
None of these contentions can be sustained. 28 USCA § 751, under which eoncededly the bond was given and accepted, contains no provision for the return of property once a bond has been accepted therefor. It is expressly provided that only if judgment passes in favor of the claimant shall the court cause the bond to be cancelled, “but if judgment passes against the claimant, * * * and the claimant does not within twenty days thereafter pay into the court * * * the amount of the appraised value of such vessel * * * so condemned, with the costs, judgment shall be granted upon the bond, on motion in open court, without further delay.”
That this language was intended to exclude the cancellation of a bond upon the surrender of the property for the release of which it was given is further indicated by the language -of 28 USCA § 752, in which it is provided that all vessels, etc., condemned for violation of the Revenue Acts, etc., “and for which bonds shall not have been given by the claimant,” shall be sold at public sale. This statute, in that it contains no provision for the return of a bonded vessel, clearly contemplates that, upon a decree of forfeiture, a claimant, whose vessel has been released under bond, has no option but to pay the bond.
In the case of the “Haytian Republic,” 154 U. S. 118, 14 S. Ct. 992, 38 L. Ed. 930, it was clearly held that a release of a vessel under a bond given under this statute operates permanently to sever the vessel from the control of the court, so that it remains subject to liens theretofore and thereafter attaching, and- subject to seizure for other offenses. Indeed, under the Admiralty Law (see 28 USCA § 754) it is altogether clear that it is beyond the power of the court to recall a vessel which has once been released on stipulation. “The Union,” Fed. Cas. No. 14,346; “The White Squall,” Fed. Cas. No. 17,570; U. S. v. Ames, 99 U. S. 35, 25 L. Ed. 295. The reasons for this rule are clearly set forth in the opinion in the ease of “The Union,” supra. The same reasons have equal application to bonds or stipulations given pursuant to 28 USCA § 751 in cases involving violations of the revenue or navigation laws. And in the case of United States v. Davidson, 50 F.(2d) 517, it was held by the Circuit Court of Appeals for the First Circuit that the provisions of 28 USCA § 751 were mandatory, with the result that any owner who so elects is entitled under this section to a release of his vessel seized under the customs and revenue acts, and that the vessel, once released, is beyond the reach of the Treasury Department even under the drastic provisions of 27 USCA § 42.
I conclude that in the case at bar neither the government nor any of its officers or agents, judicial or executive, had power to recall the vessel once it was released. It follows that, in so far as the decree of the court ordered a sale of the vessel which had previously been released, the decree was beyond the power of the court and of no effect. The presence of this clause in the decree is plausibly explained by the District Attorney. He calls attention to a practice to embody in all such decrees a provision either for a sale or in lieu thereof for a judgment on the bond, so that, if the vessel had been released on bond without notice to his office, the alternative remedy in the decree might have effect.
Since here, the vessel having been released, the court was without power to order its sale, it follows that anything said or done by the Marshal or the district attorney looking to a recall of the vessel was wholly nugatory. And the petitioner’s contention that the United States, by reason of the acts of the Marshal and the district attorney looking to a recall of the vessel, is estopped from proceeding on the bond, is wholly without foundation in law. United States v. Maxwell Land-Grant Co. (C. C.) 21 F. 19; Potter v. United States (C. C. A.) 122 F. 49. See also, Steele v. United States, 113 U. S. 128, 5 S. Ct. 396, 28 L. Ed. 952.
The rule, therefore, requiring the district attorney to show cause why the judgment should not be vacated is accordingly discharged. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218951/ | CAMPBELL, District Judge.
This is a suit brought by American-West African Line, Inc., owner of the American steamship West Kebar, against the respondents herein, for contribution in general average in connection with certain losses and expenses' sustained and incurred by the libelant, as a result of the collapsing of the furnaces in the vessel’s center boiler in February, 1930, while she was at the port of New York.
The Vacuum Oil Company was the shipper of the cargo, which consisted of eases of oil and gasoline and drums of gasoline.
The Vacuum Oil Company executed a general average agreement, wherein it agreed that so much of the losses and expenses as upon adjustment of the same, to be stated by Johnson & Higgins, might be shown by the statement to be a charge upon the cargo, should be paid by it according to its ratable proportion thereof in and for settlement in accordance with the statement. The cargo of the Vacuum Oil Company is the only cargo concerned in this case.
The Vacuum Oil Company, some time after executing the bond, transferred its assets and liabilities to the Standard Oil Company of New York, which assumed all of its liabilities. The Standard Oil Company of New York then changed its name to Socony Vacuum Corporation, and the Socony Vacuum Corporation transferred all the assets and business which it had received from Vacuum Oil Company to Vacuum Oil Company, Inc., which assumed all of the liabilities of the former Vacuum Oil Company.
Both the Socony Vacuum Corporation and the Vacuum Oil Company, Inc., have been made parties respondent in this suit.
The other respondents are underwriters —apparently insurers of the cargo — which guaranteed the payment of all proper general average, salvage and/or special charges for which the goods are liable. The Vacuum Oil Company was a self-insurer as to part of the cargo, and also executed a general average guaranty.
The amount demanded in the libel is $5,-759.20, which is the amount shown due from the Vacuum Oil Company in the general average adjustment prepared by Johnson & Higgins.
The respondent Globe & Rutgers Fire Insurance Company is in the hands of the superintendent of insurance of the state of New York, and an injunction has been issued against the filing of suits or the continuation of suits against it.
This suit, therefore, did not proceed as against the Globe & Rutgers Fire Insurance Company, and none of the findings herein bind it, and it is not represented before this court or bound by the decree that may be entered herein, but the suit proceeded against all the other respondents, the same as though the Globe & Rutgers Fire Insurance Company had never been made a party to’ this suit.
The parties before this court stipulated that the general average adjustment may be taken as a correct statement of accounts between the parties (with the exception of an, item of $365.76 covering legal liability insurance) provided that the court finds that this case is a proper one for general average contribntions.
The West Kebar is a steamship about 407 feet long, equipped with triple expansion reciprocating engines, and with three 'Scotch boilers. She was built in. 1920. She bore the classification of A — 1 in the American Bureau, which is the highest classification in that society. Alongside her name on the American Bureau Record appears the symbol of the Maltese Cross, indicating that the ship was built under the supervision of the American Bureau, and that her materials and machinery were tested to American Bureau requirements, and that she was subjected to special surveys during construction. She had been engaged in the West African trade for a number of years.
The West Kebar arrived in Boston from Africa on January 23, 1930, remaining there three days. She arrived in New York on January 27th and went to Carteret, N. J., where she discharged mahogany logs. She also carried a shipment of palm oil, some of *517which was loaded in her after peak tank. She next went to Pier 38, Brooklyn, where she discharged the palm oil; the discharge being completed on February 3, 1930. She went to Robins Dry Dock, arriving there at 9:10 a. m. on February 11, 1930. She came off from the dry dock on February 13, 1930, but remained in the repair yard until February 18, 1930. On that day she left for Bayonne, N. J., in tow of tugs to load kerosene, gasoline, and lubricating oil for the Vacuum Oil Company. She continued loading at Bayonne until February 21, 1930, and left that day in tow of tugs for Brooklyn. She arrived at Pier 38, Brooklyn, at about 4:30 p. m. on February 21st, Saturday, February 22d, was Washington’s Birthday, and no work was done on the ship on that day or the following day, Sunday, February 23d.
On Monday morning, February 24th, two tubes and a stay bolt in the center boiler were found to be leaking,' and that boiler was cut out at 8 a. m. On February 25th furnace doors of the center boiler were opened for inspection, and it was found that the three furnaces in that boiler had collapsed and the inspectors were immediately notified. As soon as the boiler had cooled down sufficiently to permit an internal examination, Mr. Gledhill,i superintending engineer of the libel-ant, and members of the engineering personnel of the ship, made a careful examination of the boiler and furnaces. They found indications of oil on the furnaces. The furnaces had overheated due to the presence of oil which acted as an insulator between the furnace metal and the water itself, causing the transfer of heat to be lost. Later on, a careful examination was made to ascertain where the palm oil had come from. Palm oil was found in the vessel’s No. 4 port double bottom tank, where her boiler water was carried.
Subsequently several conferences were held at the libelant’s office, which were participated in by representatives of the shipowner, United States Salvage Association, the American Bureau, and the cargo interests, and it was decided that it was absolutely necessary for the safety of the ship and cargo that the cargo, which was of a highly inflammable nature, be removed, as it was necessary to use acetylene torches to move the deflected furnaces. The steamship West Lashaway, which was also owned by the libelant, was available, and it was agreed that the West Kebar’s cargo should be transferred to the West Lashaway, and carried forward to Africa. The transfer of the cargo was completed on March 12th and the West Lashaway transported the cargo to Africa and there delivered it safely.
On March 5th, all the interested underwriters now before this court entered into an agreement with Johnson & Higgins, who were eoneededly the agents of the libelant, wherein it was recited that the three furnaces of the center boiler had collapsed, that -the surveyors had recommended the renewal of the furnaces, and that the gasoline and kerosene be discharged to permit of repairs being effected, which gasoline and kerosene con.stituted about three-fourths of the cargo on board.
The agreement further recited that the owners had the West Lashaway available, and to save the expense incident to holding the West Kebar’s cargo while repairs were being effected, they proposed transferring the whole of the cargo to the West Lashaway and forwarding it under the original bills of lading, to destination, without additional freight, in consideration of the underwriters agreeing that there be allowed in general average, in addition to the cost of discharging the West Kebar, the cost of loading her cargo into the West Lashaway, together with the damage to cargo sustained in the discharging and reloading operations, wages, provisions, fuel and engine stores, and such other general average allowances as would have been made to the West Kebar had her cargo been held and reloaded into her and taken forward by her.
All the interested underwriters now before this court signed the agreement.
Spelman, representing the Union Marine Insurance Company, Limited, signed the agreement, provided the case was shown to be one of general average. F. H. Cauty, representing Thames & Mersey Marine Insurance Company, Limited, and Talbot Bird & Co., on behalf of Eagle Star & British Dominions Insurance Company, Limited, simply signed the agreement with the letters “W. P.” beside their respective signatures.
Thereafter Johnson & Higgins drew up a statement of general and particular average and completed the same on February 3, 1932.
The respondents now before this court refused to pay general average contributions, and as a result of their refusal this suit was instituted in November, 1932.
The libelant bases its claim upon a contract entered into between the libelant and the Vacuum Oil Company, dated November 14, 1929, which provided for the transporta*518tion of the Vacuum Oil Company’s petroleum products on the libelant’s vessels, and those of Messrs. Elder Dempster & Co., Limited, between January 1, 1929, and December 31, 1930.
Article 2 of the contract provided that all consignments of the shippers should be carried under deck, freighters being responsible for careless handling according to conditions of bills of lading, copies of which were stated to be thereto attached. The same article further provided that where the bill of lading conflicted with the terms of the contract, it was understood and agreed that the provisions of the contract were to govern.
The terms of the libelant’s regular outward form of bill of lading, which was attached to said contract, thereby became an integral part of the contract.
The bills of lading for the cargo in question were not issued until the day after the accident, but the form attached to and which became an integral part of the said contract contained a clause reading as follows: “General average shall be adjusted and settled in New York and shall be payable according to the York-Antwerp Rules 1924, 1 to 15 inclusive, and Rules 17 to 22 inclusive, and as to matters not therein provided for according to the Laws and Usages of the port of New York. Average bond must be furnished with such security as may be required by Master or vessel’s agent, before delivery of the goods. * * * ”
Subdivision (b) of 1924 York-Antwerp Rule 10 reads as follows: “The cost of handling on board or discharging cargo, fuel or stores, whether at a port or place of loading, call or refuge, shall be admitted as general average when the handling or discharge was necessary for the common safety or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage.”
Subdivision (c) of rule 10 reads as fol- ' lows: “Whenever the cost of handling or discharging cargo, fuel or stores is admissible as general average, the cost of reloading and stowing such cargo, fuel or stores on board the ship, together with all storage charges (including fire insurance, if incurred) on such cargo, fuel or stores shall likewise be so admitted. But when the ship is condemned or does not proceed on her original voyage, no storage expenses incurred after the date of the ship’s condemnation or of the abandonment of the voyage shall be admitted as general average.”
While it may well be that, as contended by libelant, the terms of rule 10, subdivisions (b) and (c), of said York-Antwerp Rules, fit the present situation, if that rule be so construed that the effect is to relieve the vessel or the owners from negligence at the port of loading before the commencement of the voyage, as contended on behalf of libelant, then to that extent the agreement incorporating that rule would be invalid as against public policy, under the provisions of the third section of the Harter Act, title 46, § 192, U. S. Code (46 USCA § 192).
Prior to the passage of that act, it was the settled policy of this country not to permit any vessel or owner thereof which as a common carrier transported merchandise or property to or from any port of the United States of America to limit the liability of the vessel or owner for negligence (Liverpool & G. W. Steam Co. v. Phenix Ins. Co., 129 U. S. 397, 9 S. Ct. 469, 32 L. Ed. 788), but by the third section of the Harter Act, supra, it was provided that if the owner “shall exercise due diligence to make the said vessel in -all respect seaworthy and properly manned, equipped, and supplied, neither the vessel, her owner or owners, agent, or charterers, shall become or be held responsible for damage or loss resulting from faults or errors in navigation or in the management of said vessel.”
The due diligence referred to in that act must be shown before the commencement of the voyage. The Consort (D. C.) 49 F.(2d) 406.
In The Irrawaddy, 171 U. S. 187, at page 189, 18 S. Ct. 831, 43 L. Ed. 130, Mr. Justice Shiras, writing for the court, said: “The answer we shall give to the question certified by the circuit court of appeals must be determined by the meaning and effect which should be given to the act of February 13, 1893 [c. 105, 27 Stat. 445 (46 USCA §§ 190-195)], known as the 'Harter Act.’ Admittedly, upon the facts conceded to exist in the present ease, the owner of the ship has no right to a general average contribution from the cargo, unless such right arises from the operation of that act.” In that ease there was no agreement as to general average.
In The Jason, 225 U. S. 32, 32 S. Ct. 560, 56 L. Ed. 969, there was an agreement as to general average, which is now known as the Jason clause, and Mr. Justice Pitney, writing for the court, distinguished that case from The Irrawaddy, supra, and at page 55 of 225 U. S., 32 S. Ct. 560, 564, 56 L. *519Ed. 969, said: “Since the clause contained in the bills of lading- of the Jason’s cargo admits the shipowner to share in the general average only under circumstances where by the act he is relieved from responsibility, the provision in question is valid, and entitles him to contribution under the circumstances stated.”
Clearly the converse of this proposition must be true, and if as construed by libelant rule 10, subdivision (b), admits the shipowner to share in the general average under circumstances where by the act he is not relieved from liability, the provision in question is invalid and he is not entitled to contribution under the circumstances.
In The Isis, 63 F.(2d) 248, 1933 A. M. C. 390, the Circuit Court of Appeals of this circuit considered the Jason clause and its relationship to the Harter Act, and at page 394 of 1933 A. M. C., 63 F.(2d) 248, 250, Circuit Judge Mantón said, referring to The Jason, supra: “The court pointed out that, so far as the Harter Act relieved the shipowner of responsibility for the negligence of the master and crew, it is no longer against the policy of the law for him to contract with the cargo owners for a participation in general average contribution growing out of such negligence. Thus the shipowner may contract exemption in so far as such is not in violation of the Harter Act.”
Under the provisions of the third section of the Harter Act, the libelant was bound to use due diligence before the commencement of the voyage to make the steamer West Eebar seaworthy, and the burden was on the shipowner to show that he had used due diligence to make her seaworthy. The Lewis H. Goward (D. C.) 34 F.(2d) 791.
The testimony on this phase of the ease took a wide range and need not be discussed at great lengthy but can be reduced to a narrow compass.
The palm oil entered the No. 4 double bottom tanks which contained the water for the boilers through a broken heating coil in the after peak tank. Complaint was made by the consignees that steam was finding its way into the palm oil, and after the discharge of the palm oil was completed, an investigation was made and the leaking joint was found and repaired.
Notwithstanding the fact that all engineers are familiar with the danger of oil entering a boiler, no investigation was made to determine whether any palm oil had found its way into the boiler water in No. 4 double bottom tanks. This was negligence and certainly did not show due diligence to make the ship seaworthy.
Furthermore, the oil had to go through the engineroom to get into the double bottom tanks, and in the engineroom there was maintained a tank with a glass to look through, for the purpose of observing if oil was passing through, and it was negligence on the part of the engineering force not to have observed the passing of the oil.
Libelant suggests that an exception be made to the rule, and that due diligence to make the ship seaworthy be required before the loading of the cargo before the accident, instead of before the commencement of the voyage.
No such exception can be made under the Harter Act. The Newport (C. C. A.) 7 F. (2d) 452; The President (D. C.) 52 F.(2d) 680, 682. But even if it could, it would not relieve the libelant, as the evidence shows that the oil which caused the collapsing of the furnaces in the middle boiler was in the boiler water in the No. 4 double bottom tank before the said cargo was loaded, and that at the time of loading the cargo, the ship' was unseaworthy.
This is undoubtedly true notwithstanding the fact that the accident did not occur until some time after the repairs to the leaking coil had been made, and after the inspection of the center boiler had been made by Mr. Low, for the reason that in the movements of the ship between those times, the ship was not moved by her own power but by tugs, and it was not until she started to use her own power and use the injector that the shallow depth of the water was so stirred as to carry the oil into the boiler.
The libelant cites many cases to show that if these acts of negligence had happened at sea, or in port after the voyage had commenced, they would be held to be errors of management, which is undoubtedly true; but the answer is that they did not happen at sea, nor in port after the voyage had commenced, but before the commencement of the voyage, and they constitute negligence.
The movement of the West Kebar from one berth to another in the same harbor did not constitute the commencement of the voyage. There is a distinction between the preparation for a voyage and the management of the same after it is begun. Gilchrist Transp. Co. v. Boston Ins. Co. (C. C. A.) 223 F. 716.
I do not agree with the libelant that the contract in question was not a shipper’s document such as was contemplated by sections 1 and 2 of the Harter Act (46 USCA §§ 190, *520191) ; on the contrary, the contract was between carrier and shipper, and to such contract the act applies, but it does not apply to a charter party by which a ship is demised. Golcar S. S. Co., Limited, v. Tweedie Trading Co. (D. C.) 146 F. 563.
I disagree with libelant’s contention with reference to the two respondents whose representatives placed the letters “W. P.” after their names.
There is no general average to pay, as I have found that the libelant was not entitled to contribution in general average, under the circumstances of this ease.
In dhe face of the common use of the words “without prejudice” following signatures in maritime matters, and the words used by those who signed before the two in question, it seems clear to me, without the necessity for further evidence, that they used these letters to express the same reservation as the former signers, much the same as they might have used ditto marks.
The libelant has failed to prove by a fair preponderance of the evidence that it was entitled to contribution in general average in, this case, or that by reason of the general average agreement any of the signers! of the agreement, who are now before the court, are hable to the libelant in any sum whatever.
The respondents except the Globe & Rutgers Fire Insurance Company, which was not before this court on this trial, are entitled to a decree dismissing the libel as to each and all of them, and, as all appear by the same proctors, to one bill of costs.
A decree may be entered in accordance herewith.
Settle decree on notice.
If this opinion is not considered a sufficient compliance with rule 46% of the Admiralty Rules (28 USCA § 723), proposed findings of fact and conclusions of law in accordance with this opinion may be submitted for the assistance of the court, as provided by the rules of this court. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218952/ | SCHOONMAKER, District Judge.
This is a suit by the receiver of a national bank to recover an assessment against a stockholder made by the Comptroller of the Currency under authority vested in him by sections 5151 and 5234 of the Revised Statutes of the United States (12 USCA §§ 63, 192), section 1, c. 156, Act of June 30, 1876 (12 USCA § 191), and section 23, c. 6, Act approved December 23, 1913, known as Federal Reserve Act (12 USCA § 64).
The question raised at the argument is whether the affidavit of defense in the facts set up in paragraphs 6 to 16’, inclusive, under the heading of “New Matter,” makes out a good and valid defense to the action.
Briefly stated, the averments in these paragraphs are that on October 1, 1931, the Third National Bank of Pittsburgh, by authority of its directors, and without any action of its stockholders, sold all the assets of the bank to the Mellon National Bank, which, in consideration thereof, assumed all of the liabilities of the Third National Bank. This was in pursuance of a written agreement between the two banks, dated October 1,1931, a copy of which is attached to the affidavit of defense as Exhibit A. This agreement discloses that the Third National Bank sold and conveyed to the Mellon National Bank all its properties, assets, business, and effects as of the close of business on September 30, 1931, excepting any stockholders’ statutory liability, or any money paid or accrued in account thereof; that the Mellon National Bank *521agreed to assume, pay, and discharge the indebtedness and financial obligations or liabilities of the Third National Bank, as shown by its books and financial records as of the close of business on September 30, 1931, other than any liability to its stockholders, and excepting a note for $500,000 given by the Third National Bank to the Mellon National Bank contemporaneously with the execution and delivery of the agreement of October 1, 1931.
The agreement further provided that the Mellon National Bank was to liquidate and convert into cash the assets so transferred to it and to apply the proceeds thereof (1) to pay its expenses in liquidating and administering these assets; (2) to reimburse itself for the amount paid out on liabilities assumed, with interest at 5 per cent, per annum; and (3) to return the balance of said assets, if any, remaining after making the payments specified.
On October 1, 1931, the Third National Bank gave to the Mellon National Bank its judgment promissory note in the sum of $500,000 due October 10, 1931, as provided for by the terms of said agreement, and as collateral thereto.
It is further averred in the affidavit of defense that, at the time this agreement was made, the Third National Bank was solvent; that at the time the Comptroller of the Currency made the assessment there were no debts of the Third National Bank requiring such an assessment; and that the sole purpose of appointing a receiver was to collect from the stockholders the amount necessary to pay the $500,000 note given to the Mellon National Bank, which was not a legal obligation of the Third National Bank such as would support an assessment against stockholders.
It is averred that the Comptroller of the Currency did not take over the Third National Bank on September 30,1931, as alleged in the statement of claim; but it is alleged that he did nothing with reference to the affairs of the bank until .January 28, 1932, when he appointed C. O. Thomas as receiver, not for the purpose of liquidating the affairs of the bank, but to collect from the stockholders an assessment to pay the note of $500,000 of the Mellon National Bank. It is not denied that the Comptroller of the Currency, on January 10, 1933, made the assessment in the form set out in the plaintiff’s statement of claim. Merely the legality of that assessment is disputed.
Under these facts, we cannot see that a valid defense is made out.
The defendant contends that because the Third National Bank closed its doors on September 30, 1931, and was then taken over by the Comptroller of the Currency, the directors of the bank were without authority to make the agreement of October 1,1931, and, therefore, that agreement and the note given in pursuance thereof are void and of no effect. Had the agreement created a new indebtedness, that position would have been correct, but such was not the case. We have here a situation where the Third National Bank ¡merely changed many creditors into one. That is a perfectly lawful arrangement and one within the power of the Third National Bank to make. Wyman v. Wallace, 201 U. S. 230, 26 S. Ct. 495, 50 L. Ed. 738; Hightower v. American National Bank of Macon, 263 U. S. 351, 360, 44 S. Ct. 123, 126, 68 L. Ed. 334. The reason of this is well stated in Hightower v. American National Bank of Macon, supra, where Mr. Justice Van Devanter said: "The remaining contention is that the debt sought to be enforced was created during the process of liquidation, and therefore is not one for which the shareholders are liable. The premise is faulty. The debt arose from the contract and represents moneys advanced in excess of what was realized from the assets. * * ’• There was power to- malte the contract. The purpose was not to obtain money to engage in new business, but simply to change from many creditors to one.” That fits the situation in the instant case exactly. If the suit were by the Mellon National Bank as a creditor to enforce liability against the stockholders of the Third National Bank, we should be obliged to hold the agreement valid. However, the instant suit is by the receiver appointed by the Comptroller of the Currency, and is brought for the purpose of enforcing an assessment against the stockholders of the bank made by the Comptroller after a determination by him that such an assessment is necessary in order to pay the debts of the association.
In such a situation, the finding of the Comptroller is conclusive upon the stockholder both as to appointment of a receiver, Cadle v. Baker, 20 Wall. 650, 22 L. Ed. 448; and the necessity and amount of the assessment, Bushnell v. Leland, 164 U. S. 684, 17 S. Ct. 209, 41 L. Ed. 598; Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 476; Casey v. Galli, 94 U. S. 673, 24 L. Ed. 168; United States v. Knox, 102 U. S. 423, 26 L. Ed. 216; Wannamaker v. Edisto National Bank of Orangeburg (C. C. A.) 62 F.(2d) 696; Miller v. *522Stock, 65 F.(2d) 773, 774 (C. C. A, 3d Cir. opinion by Buffington filed May 24, 1933).
The only ease holding to the contrary is Moss v. Whitzel (C. C.) 108 F. 579, where the District Court permitted a stockholder seeking to defend against an assessment made by the Comptroller to file a cross-bill setting forth the alleged defects in the assessment by the Comptroller. It appears by a note at the bottom of the reported case that it was compromised and went no further after the opinion filed by Judge Phillips. This case is contrary to the rulings of the Supreme Court previously noted; and we do not regard it as authority in the instant case.
Judge Buffington, in Miller v. Stock, supra, states that decision of the Comptroller as to the necessity and amount of the assessment is “open to avoidance by the court only in a direct attack upon them on the grounds of clear error of law, fraud, or mistake.”
In the affidavit of defense filed in the instant ease, there are no facts stated from which fraud or mistake can be inferred.
We therefore conclude that, in the new matters set up in the affidavit of defense, no legal defense to the plaintiff’s claim is presented.
An order for judgment may be submitted accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218954/ | SAMES, District Judge.
The patentee, Sumter B. Battey, and his assignee, Duart Manufacturing Company, Limited, instituted this suit against the defendant for infringement of patent No. 1,681,511 for a hair waving or curling device applied for November 4,1926, issued August 21, 1928. The claims of the patent alleged to be infringed by defendant’s apparatus are as follows:
“1. A hair waving or curling device comprising a frame, a rotatable form supported thereby, said frame being adapted to wind up and tension a strand of hair, means for locking the form against rotation relative to the frame, and supporting means carried by the frame and engaging a strand of hair, said supporting means being adapted to sustain the tensile stress applied to the hair by said rotatable form whereby the hair may be tensioned without imparting pull to the scalp.”
"3. A hair waving or curling device comprising a rotatable form upon which a flattened strand of hair may be wound, a frame externally embracing and rotatively supporting said form at points on either side of the portion of the form on which the hair may be wound, and clamping means mounted on said frame and adapted to grip a strand of hair whereby the said strand when so gripped may be tensioned around the form by rotating the latter relatively to> the frame.”
A simple form of the Battey device having only a single rotatable form is shown in Figure 11 of the patent. Other figures show means for operating a plurality and variety of forming instruments or curlers by which, it is claimed, a number of waves or other desired configurations of the hair may be produced. Figure 1 shows an arrangement in a frame for simultaneous operation of several forming instruments by manipulation of a single actuating element such as a gear train.
The structure shown in Figure 11 comprises a C frame which may be made of sheet metal or other rigid material such as hard rubber or bakelite. One arm of the supporting frame is bent to form a spring clip for the insertion and removal of the rotatable form or curler. The opposite arm of the frame carries at its end a tapered or conical bearing in which the tapered end of the rotatable form is inserted to provide a taper lock. (Patent, p. 5, lines 99-100-103.) The device is provided with a simple bar clamp pivoted at one end to the upper part of the frame by means of a loose rivet, the other end of the bar clamp swinging under a catch fastened to the rear vertical frame part. When a strand of hair is placed *532between the top frame member and the bar, the bar may be snapped into the catch and by this means apply to the hair a yielding grip which will be sufficient to permit the tensioning of the hair between the upper part of the frame and the rotatable form. (Patent, p. 6, lines 5-10-U5.)
The elements or features comprised in claims 1 and 3 of the Battey device axe shown in said Figure 11.
Claim 1. 1. A frame. 70-71-72-73.
2. A rotatable form supported by said frame to wind up, and tension a strand of hair. A.
3. Means for locking the form against rotation relative to the frame. 74-75.
4. Supporting means carried by the frame and engaging a strand of hair, said supporting means being adapted to sustain tensile stress applied to the hair by said rotatable form whereby the hair may be tensioned without imparting pull to the scalp. 81-82-83.
Claim 3. 1. A rotatable form upon which ' a flattened strand of hair may be wound. A.
2. A frame externally embracing and rotatively supporting said form at points on either side of the portion of the form on which the hair may be wound. 70-71-72-73.
3. Clamping means mounted on said frame and adapted to grip a strand of hair whereby said strand when so gripped may be tensioned around the form by rotating the latter relatively to the frame. 81-82 — 83.
Plaintiffs’ commercial device is designated the “Duart.” (Plaintiffs’ Exhibit 13.) It is shown on drawings or charts made by plaintiffs’ expert, admitted in evidence as Plaintiffs’ Exhibits 15 and 17. The elements or features of claim 1 of the patent appearing in said Figure 11, and above specified as 1, 2, 3, and 4, axe shown and identified in said Exhibit 15, as incorporated in the “Duart” apparatus as B, A, D, and C, respectively. The elements or features of claim 3 of the patent, appearing in said Figure 11 and above specified as 1, 2, and 3 thereof, are shown and identified in said Exhibit 17, as incorporated in the “Duart” apparatus as A, B, and C respectively.
Defendant’s hair waving apparatus, claimed by plaintiffs as infringing the Battey patent, is designated the “Artistic.” (Plaintiffs’ Exhibit 12; Defendant’s Exhibit II.) It is shown on drawings or charts made by plaintiffs’ expert, admitted in evidence as Plaintiffs’ Exhibits 14 and 16. The elements or features of claim 1 of the patent in said Figure 11 above specified as 1, 2, 3> and 4 thereof are shown and identified in said Exhibit 14 as incorporated in the “Artistic” apparatus, as B, A, D, and C, respectively. The elements or features of claim 3 of the patent appearing in said Figure 11 above specified as 1, 2, and 3 thereof are shown and identified in said Exhibit 16 as incorporated in the “Artistic” device as A, B, and C, respectively.
Each pf claims 1 and 3 of the Battey patent comprises a rotatable form or curler for winding a strand of hair, and a frame for supporting said form. Claim 1 includes means for locking the form against rotation relative to the frame, and supporting means on the frame engaging a strand of hair, adapted to sustain tensile stress applied to the hair by the form without imparting pull to the scalp. Claim 3 includes clamping means on the frame adapted to grip a strand of hair for tensioning the latter relative to the frame. The last element of claim 1 provides means for tensioning by the curler of a strand of hair wound thereon without pull to the scalp. The last element of claim 3 provides means for tensioning by the curler of the strand thereon against the frame.
Defendant construes the frame of the Battey patent as one supporting and spacing a plurality of forms, whereby the hair may be more effectively acted upon by the forms, and points out as the essence of the invention, as shown in Figure 1, that the wave is imparted to the hair over forms of the correct shape to directly impart the desired curvature to the hair; that the spacing of the forms determines with mathematical certainty the length and shape of the wave produced; that the de*533vice permits of the uniform stressing of the hair disposed between the rotatable forms.. Figure 1 shows an arcuate frame as a preferred embodiment of the device on which a plurality of curlers may be spaced and operated. The elements of claims 1 and 3 embodied in Figure 11 are disclosed in a single form or curler for tensioning of the hair against the C frame. The patent is not confined to the particular figure shown in the drawings as the preferred one. French v. Buckeye Iron & Brass Works (C. C. A.) 10 F.(2d) 257.
Defendant contends that the means, modes of operation, functions, and results of defendant’s apparatus are wholly different from those covered by the patent; that the frame, rotatable form, locking means, and hair supporting means as specified in the patent constitute a co-operative entity not embodied in defendant’s protector and curler; that there is no frame or form in defendant’s apparatus in the sense of the Battey patent; that the “Artistic” device has no means to lock a form against rotation whereby tension may be applied by rotating a rotatable form which is in turn locked; and that defendant has no clamping means mounted on a frame as specified in claim 3 of the patent.
A comparison of the “Duart” and “Artistic” apparatus discloses some difference of' structure. Plaintiffs employ a ratchet lock against rotation of the curler when in position in the uprights of the frame. The curler of the “Artistic” apparatus is locked by an internal spiral eluteh inserted in the end of the curler.
Defendant designates the frame or support of the uprights which engage the curler, to which the jaw for clamping the hair at the scalp is attached, the “protector.” The latter is spaced longitudinally to provide a chamber for the escape of steam in the application of heat to the hair. Defendant contends that the “Artistic” apparatus comprises separate means for separate processes in tensioning and effecting the desired waves or configurations of the hair; that the hair is wound and tensioned manually on the curler apart from the protector; that rotation of the curler after its insertion in the slots of the uprights is for the purpose of taking up the slack in the strand occasioned by such insertion, whereas plaintiffs’ device is an entity of means and operation by which the tensioning of the hair is effected wholly by the rotation of the form against another form or forms, or equivalents, while engaged in the arms or uprights of the frame.
Literally, at least, claims 1 and 3 of the patent read directly on the “Artistic” apparatus, and it is apparent from the operations and use of the two commercial devices, as shown by the testimony, by the photographs in evidence, and by the demonstrations made at the trial, that the implements employed, the operations of, and the results obtained by, the “Duart” and the “Artistic,” are substantially the same. In the operation of each, a flattened strand of hair is engaged at the scalp by a clamp or jaw locked by a cam latch to the frame or protector. The opposite end of the strand is engaged on the roller by a tongue hinged thereon, and rolled spirally on the curler apart from the frame or protector. The strand, held taut between the roller and clamp, is rolled down manually to the slots of the uprights or side pieces of the framo or protector, and adjusted therein and locked by the ratchet or spiral eluteh against unwinding or slack as the end slugs engage the slots. Further tension is then applied to the strand by rotation of the roller or curler in the open turn of the latter. In the process of tensioning the strand of hair tensile stress on 'the scalp is avoided by the clamp or jaw holding the strand tightly to the protector or frame. From the testimony in the case, it appears that the operation of spiral winding and tension as described, with the application of solutions and heat, flattens or changes the shape of the filaments of the hair from round to oval, which is essential in the production of the permanent Croquignole wave.
Appropriation and infringement of plaintiffs’ means preventing pull to the scalp and for tensioning the hair by rotating the curler relative to the frame is not avoided because the clamp on the protector of the “Artistic,” in addition to preventing pull on the scalp, serves to protect the scalp and hair against heat. Corrington v. Westinghouse Air Brake Co. (C. C.) 173 F. 69; Smith Cannery Machines Co. v. Seattle-Astoria Iron Works (C. C. A.) 261 F. 85; Palmer v. E. Z. Waist Co. (D. C.) 278 F. 530; Krauth v. Autographic Register Co. (D. C.) 285 F. 199; Johns-Manville Corp. v. Nat. Tank Seal Co. (C. C. A.) 49 F.(2d) 142.
Means employed for locking the curler against rotation relative to the frame or protector — in the “Duart” device by the ratchet and pawl; in the “Artistic” apparatus, the internal spiral eluteh — serve the same purpose, and appear merely as mechanical equivalents. A combination is identical in substance with what is already patented, if it consists of the same elements, or mechanical *534equivalents, combined in substantially tbe same way to produce substantially the same results. 48 Corpus Juris, p. 31, § 30; Seamless Rubber Co. v. Stall, etc., Mfg. Co. (C. C. A.) 23 F.(2d) 820; Imhaeuser v. Buerk, 101 U. S. 647, 25 L. Ed. 945. The ratchet and pawl are ordinary mechanical expedients commonly used in all the arts to prevent unwinding. Naivette, Inc., v. Bishinger et al. (C. C. A.) 61 F.(2d) 433, 436.
The spiral clutch evidently is of the same character and serves a similar purpose. The “Duart” device discloses changes in form and proportions from the structure shown in Figure 11, and some refinements of construction in the former.
The record, however, sufficiently discloses that plaintiffs’ commercial device embodies all of the elements of claims 1 and 3 of the Battey patent. It is also shown that the apparatus of the defendant incorporates all of the elements of said claims, and that the two commercial devices are substantially identical in means, mode of operation, functions, and results.
In addition to denial of infringement because of essential differences in defendant’s apparatus with that of the Battey patent, it is contended that the patent is invalid because of anticipation and because of lack of invention. Defendant introduced many earlier patents, foreign and domestic, to show that curlers having frames supporting the same with means to prevent unwinding were old in the art. It is further contended that Battey’s means for clamping the hair at the scalp was not invention, but was merely the exercise of mechanical skill. Defendant introduced in evidence Mayer reissue No. 17,393, March 19, 1927, and Decker No. 1,683,531, September 4, 1928, the latter subsequent to Battey in application and issuance. Both of these patents show means for clamping a strand of hair at the scalp.
Since the ease was submitted, and on October 12,1932, the Circuit Court of Appeals of the Sixth Circuit rendered its decision in the case of Naivette, Inc., v. Bishinger et al. (Herold Bros. Co. v. Philad Co. et al.), 61 F.(2d) 433. The four patents in those suits, held valid and infringed by the District Court, relate to the permanent hair waving art. The eases arose out of the same act of infringement, and were tried as one. Two of the patents involved are Mayer, reissue No. 17,393, and Decker, 1,683,531. The court discusses the Mayer reissue patent at length, and first considers and disposes of the process claims of the Mayer patent. The opinion affords an outline of the Croquignole method of hair waving as described and developed by Mayer, and of his difficulty in effecting a tight uniform spiral wind in curling from the tips, with both hands engaged with the curler, without pulling the hair at the scalp. This difficulty Mayer overcame by providing a protector clamp which gripped the hair in a flat thin band so tightly that discomfort was avoided, and a uniform tension of the filaments of the hair effected, as a step in the method of production of the Croquignole wave. The court finds invention in Mayer’s method of hair treatment, and sustains the process claims of his patent.
Considering next the claims of Mayer for a hair engaging clamp in the first reissue, and the heater levers of the second reissue, the court finds no invention.
Quoting the opinion in the Naivette Case: “Given a process that is patentable, we are confronted with the relationship of process to machine. It is settled that there is a fundamental difference between process and machine, and the process may be patentable irrespective of any particular form of machinery or mechanical device for practicing it. The converse is also true. * * * Having discovered a new process for giving the Croquignole wave, it became necessary for Mayer to reduce it to practice, either by known appliances, or by those newly devised. Until he accomplished this his conception was not a patentable invention, because useless. * * * If the means for putting his process into practice were obvious, or already disclosed by the art, no invention was involved in making use of them, no matter how clearly the process might disclose invention. *. * * Mayer, conceiving that holding a flat strand of hair under tension was a necessary step- in his new process, the use of a clamp for that purpose must have been obvious. Moreover, clamps were found in the art performing substantially the same function: • * * There is no contradiction in sustaining validity of a process, which includes clamping as a step in a new combination, and yet to deny validity to the patent for a clamp as a unitary device. Nor is the consideration we have given to commercial acceptance of the Mayer process persuasive of invention in the appliance, since novelty is the essence of invention, and the appliance is not new.”
Holding the claims of the clamping means of the Decker patent invalid for lack of invention, and noting that the most contended for is that Decker improved upon the protector and insulating clamp of Mayer by *535combining them so that both could be applied in a single operation, including an air space increasing the thermal insulating qualities of the combination, and providing a cam latch for the protector, the court says: “We fail to see invention in Decker. He combined old elements, but manifestly in such a way as must have been obvious to anyone skilled in the art, and the combination produced no new result. If what he did marked any improvement in the art, it solved no real problem and answered no recognized need, and such advance, if any, as was achieved was altogether too trivial to rise to the dignity of invention.”
The similarity of the clamping means for tensioning the hair without pull to the scalp of the Mayer, Decker, and Battey devices is apparent. The decision of the Circuit Court of Appeals in the Naivette Case, it seems to me, sustains the contention of the defendant that Battey’s attachment was obvious, and was not invention, and that the decision should be followed in the instant ease.
The combination of the remaining elements of claims 1 and 3 of the Battey patent appear old in the art and anticipated. Devices comprising a rotatable form or curler for winding a strand of hair, a frame for supporting said form, and means for tensioning and for preventing unwinding, are shown in Grocott, 854,884; Mayer, Re. 17,393; Gaire, 1,610,855; and Decker, 1,683,531.
The Court of Appeals in the Naivette Case also holds Bishinger’s patent, No. 1,718,025, invalid because lacking in invention. Bishinger apparently devised a curler rod with ratchet teeth in the ends, and spring pawls upon the protector clamp to engage the teeth, which not only facilitated the winding operation, but gave a more positive lock to the curling rod, and permitted him to increase the tension on the hair by turning the rod after it had been positioned upon the protector clamp.
Evidence was received, subject to objection and final ruling, offered to prove that defendant’s device has been developed independently of the^ patent, in the natural course as mechanics develop things in which they are working; that defendant’s witness Wehner took the Mayer device and others that came over from Germany and developed modifications of the same up to the present form used by Wehner; and that defendant’s witness Baum, from whom the defendant obtains some of the parts for the “Artistic” apparatus, improved on Wehner in producing the latter. Such evidence is incompetent. If a device so developed is substantially identical with one under a valid patent, a defense of independent development, like that of a lack of knowledge, would strip the patent of all protection.
Over the objection of defendant, plaintiffs called Ernest Baum, not a party to the suit, who testified that he was paying the fees of defendant’s counsel and the court costs of the suit. The testimony was properly received.
“A person is bound by the decision in a patent infringement suit, where, although not a party, he openly, avowedly and with the knowledge of plaintiff, assumed, controlled and conducted, or participated in, the defense at his own cost or for his own interest. Beyer Co. v. Fleischmann Co. (C. C. A.) 15 F.(2d) 465; Nelson Mfg. Co. v. F. E. Myers, etc. Co. (C. C. A.) 25 F.(2d) 659; 48 Corpus Juris, p. 406, § 544, note 38 (a) .
In view of the foregoing, it appears that the defendant has sustained the required burden of proof that claims 1 and 3 of the Battey patent are invalid because of anticipation in the prior art, and because of lack of invention, and that defendant is entitled to judgment as prayed.
Findings and decree accordingly may be prepared, served and submitted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218955/ | NETERER, District Judge.
On February 4,1933, the Fidelity Savings & Loan Association, a Washington corporation, of Spokane, Wash., one of the petitioning creditors, commenced an action in foreclosure on real estate situated in Spokane county, Wash., and filed lis pendens with the county auditor the same day. The summons and complaint were served on the alleged bankrupts on February 7 following. On April 27, 1933, it joined in a petition for involuntary bankruptcy proceedings against Bekins and Bekins, alleging execution of a note in the sum of $80,000 on April 7, 1930, and a mortgage on real estate in Spokane to secure the payment thereof, together with taxes and insurance, in which default of payment is made; that the last half of said (1931) taxes, amounting to $1,242.87 are unpaid by bankrupts; that no payments upon said mortgage, either principal or interest, subsequent to November 30,1932, have been made and that February 4, 1933, the entire sum was declared due; that the property at the time of filing the petition was not to exceed $50,000 in value; that there is due $32,000.
The sufficiency of the petition was challenged by'motion, and the court held the petition insufficient. Permission to amend was granted, and an amended petition was filed on June 6,1933. On May 24,1933, it caused judgment to be entered in the state court case for the principal sum claimed due and attorney’s fees and costs, and foreclosing defendant’s mortgage upon the real estate.
The order of sale has been issued out of the state court and the property advertised for sale. Petition to enjoin the sale is presented on the ground that the alleged bankrupts at- all times up to the filing of the petition were, and still are, in possession of the real estate, except that filing of the petition has transferred the property into custodia legis.
The adjudication, if made, would be as of tbe date of the filing of the original petition, April 27, 1933. The Fidelity Savings & Loan Association contends that it has a fixed lien upon the property, and has right of foreclosure, irrespective of the bankruptcy proceeding.
The owners, alleged bankrupts, being in the possession of the property at the date of the institution of the foreclosure proceedings, and subsequent, does not place tbe property in custodia legis of the state court. Straton v. New, 283 U. S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. More recently, in Gross et al. v. Irving Trust Co., 289 U. S. 342, 53 S. Ct. 605, 606, 77 L. Ed. 1243, the court says: “Upon adjudication of bankruptcy, title to all the property of the bankrupt, wherever situated; vests in the trustee as of the date of filing the petition in bankruptcy. Tbe bankruptcy court bas exclusive jurisdiction, and that court’s possession and control of tbe estate cannot be affected by proceedings in other courts, state or federal. Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734, 737, 51 S. Ct. 270, 75 L. Ed. 645, and eases cited. Such jurisdiction having attached, control of the administration of the estate cannot be surrendered *537even by the court itself. * * * ‘ The filing of the petition is a caveat to all the world and in effect an attachment and injunction.’ • «* i 1>
The institution of the bankruptcy proceedings, to which the Fidelity Savings & Loan Association is a party, did bring the property-into custodia legis of the bankruptcy court, effective on adjudication. There is no allegation in the petition that the property covered by the mortgage has depreciated in value by reason of any holocaust or special agency operating thereon since the execution of the mortgage, and hi the absence of such showing the court must presume, in less than three years, the property value did not decrease to $50,000, as alleged, from a value it must have had when the mortgage was executed, or $160,000 to $240,000, based upon the rule of loan value of such associations, which the court may judicially notice in this relation. No association would make a loan on property for $80,000, if that represented more than from 33% per cent, to 40 per cent, of the value of the property. A 40 per cent, loan value would make it worth $200,000, and a 33% per cent, loan value would make it worth $240,000. ' And there must be substantial equity brought into the bankruptcy court.
The savings and loan association was one of the'parties to place the alleged bankrupt’s property under the control of the bankruptcy court for equal distribution; its mortgage lien being preferred. After the filing of the petition, the jurisdiction of this court is so far in rem that the estate is in custodia legis from that date. Straton v. New, 283 U. S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. It was competent for the savings and loan association to abandon its state court proceeding and elect the bankruptcy court as a tribunal for the administration and equal distribution of the estate, with mortgage lien preferred.
A creditor may not further proceed in the state court to obtain possession of the property which is in the possession of the bankruptcy court. This court in Re Commonwealth Lumber Co., 223 F. 667, held that creditors participating in a receivership proceeding in a state court, which has custody of the property, may not maintain a petition in bankruptcy against the same concern, and, by the same token, the Fidelity Savings & Loan Association may not proceed in both jurisdictions at the same time. When it invoked the jurisdiction of the bankruptcy court and brought the property to the bankruptcy court for equal and fair distribution, it may not thereafter revive the proceeding in the state court and pursue a remedy originally pending, contrary to and in disparagement of the prayer of its petition and its amended petition in the bankruptcy court.
The sheriff should be restrained from proceeding in the sale of the property brought into the custody of this court by the voluntary act of the Fidelity Savings & Loan Association, petitioning creditor. Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645; Belfast Sav. Bank v. Stowe (C. C. A.) 92 F. 101; In re Ball (D. C.) 118 F. 672; In re Jersey Island Pack. Co. (C. C. A.) 138 F. 625, 2 L. R. A. (N. S.) 560; In re James Carothers & Co. (D. C.) 193 F. 687.
An order may be forthwith presented; a bond in the sum of $250 to be filed to meet expense of advertisement for sale should the order be reversed on appeal, or, on trial, adjudication fail. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218956/ | NETERER, District Judge.
The libelant seeks to condemn and sell the Paul L, 71 feet long, 17 feet 6 inches beam, depth 8 feet, 100 horse power, and judgment in personam against the owner to satisfy a claim of $3,094.50, with interest from October 5, 1929.
The libelant claims to have sold to the owner and master of the Paul L certain fishing netting to be used in the Paul L. The claimant-respondent denies the purchase of the netting, or any indebtedness thereon, and pleads limitation of action by provision of the laws of California in which state the contract was made, which limits the time in which suit may be brought to two years, and then alleges by affirmative defense that the respondent was the owner of two fishing vesels, tackle, apparel, engine, furniture-, etc., each staunch and seaworthy and suitable for engagement as purse seine boats to catch sardines and other fish off the California coast where the fishing was to be done, by which agreement the libelant agreed to furnish the netting and to purchase all of the sardines caught in the operation of the boat; that libelant was to receive one share of the proceeds of such fishing operation, on a basis of twelve shares, each member of the crew of eight to receive one share, the boat three shares, and the seine one share, which wag also the custom; that the libelant was to ship the netting to Seattle, the respondent to employ immediately a crew for the-season’s operation, make the netting furnished by libelant into a seine, and treat the seine with tar for the preservation and use of the same; that he carried forward such work, and, when he was ready for the voyage from Seattle to San Pedro to engage in fishing, libelant wired to respondent not to come to the fishing grounds; that to carry forward the understanding and agreement he incurred obligations in the sum of $1,000’; and that he would have made a profit in payment of his services in the sum of $10,000; therefore the *539respondent prays that the libel be dismissed and he have judgment over.
The court finds that libelant is engaged in the sea food products enterprise, and purchases many sardines from fishermen during the fishing season off the California coast, which extends from November to April of each year; that during the latter part of September, or the first part of October, 1929, an agreement was made whereby the respondent was to fish his boat on the fishing grounds off the California coast, and the libelant would purchase all of the fish, within a certain limitation; twenty boats were to engage in fishing; each boat was limited to one-twentieth of the sardines used by libelant.
For the purpose of equipment, the respondent, although able to finance himself and boat, sought from libelant netting to make into a purse seine, suitable for that purpose. What the parties did following the conversation should more nearly interpret their agreement. The libelant gave to the respondent a letter to Hendry & Co. directing that netting be delivered to respondent for his requirements, and payment guaranteed by libelant. Hendry & Co. say it was charged to respondent and the Paul L and libelant. The netting was shipped to respondent at Seattle, not to the boat. No statement was rendered to respondent, but was rendered to libelant, who paid the account.
The respondent had two fishing boats, each suitable for the purpose. The boat was not mentioned in shipping bill. Upon arrival in Seattle, the netting was taken to the Fishermen’s Dock. The respondent employed a crew of men to equip the netting with the proper cork and lead and lines, and converted it into a purse seine. For this purpose the respondent purchased corks and lead and twine in the amount of $434.90. He expended for tar, rope, etc., $219.09; labor in fixing the netting, $675; freight, $47.40; and respondent’s service in said preparation, $100i truckage, $13; team, $5 — a total of $1,059.49.
The netting, nor completed seine, was at no time placed upon the Paul L; nor was it placed upon any other boat, but was kept in the Fishermen’s Dock.
After these expenditures had been made, and the seine constructed from the netting, corks, lead, and lines, and the boat was about ready to sail, on the 4th of November, the libelant wired respondent: “Sorry to tell you that there are more boats down here than what canneries can use so please dont come down.” Thirty boats had been engaged instead of twenty, as agreed with respondent.
Thereupon the respondent wired to the libelant asking what he should do with the netting, and received a response, on November 6: “Please ship net to San Pedro for us.” The net was not shipped; nor was arrangement made for shipping the same by libel-ant, or anything done to pay for work done on the netting, or request made by respondent therefor.
No statements were sent by the libelant to the respondent demanding payment or other disposition of the netting. It lay in a comer of the Fishermen’s Dock, and by reason thereof had deteriorated so a person could tear it apart with bis hand, and had no value for purse seine. Respondent then sold it for $90. One witness testified that he made demand by letter upon respondent, but the letter sent is not demanded or carbon copy produced, and making demand is foreign to such party’s duty in his employment, and it was not received by respondent. From the testimony, I do not believe he sent it. No steps were taken by libelant or interest manifested with relation to the netting for two years and twelve days after the netting was shipped, when this libel was filed against the Paul L and the owner. By way of parenthesis, it may be said that the statute of limitations has no application, since the netting was to be paid for out of the first catch of fish, if at all.
The value of one share in the operation of such a boat and crew for the fishing season on the fishing grounds was from five to six hundred dollars a share. The owner was unable to fish during the fishing season for which he was engaged; his boat was not employed, and his crew was in enforced idleness. All of the corks and lead and the lines furnished by the respondent in fixing the netting for use were detached from the netting after the receipt of the telegram countermanding the fishing engagement and directing that netting be sent to libelant at San Pedro.
The respondent lost the season’s fishing for his boat and for himself, and on the basis of three shares to the boat, one share to the net, and one to the master, he being one of the crew, and each member of the crew of eight to receive one share, the loss, assuming he purchased the netting, should be at the lowest estimate of loss: Three shares to the boat, $1,500; one share to the net, $500; one share to the owner or master, $500 — or a total of $2,500.
*540 The libelant objects to the sufficiency of the proof and the materiality of such testimony, under the issues in the case. The respondent fished in these waters during preceding seasons with the same boat, and his testimony as a fisherman and his previous experience as such in the same ground is competent; but better proof is not available, and no other proof was offered by the libel-ant.' Nor was this contradicted; nor is the claim speculative future profits. It entailed the loss of present employment for which money was expended in preparation made.
The respondent’s damages must in good conscience be given consideration. When a fisherman invests his money and employs a crew, prepares his boat, and is ready to enter upon an engagement, and it is countermanded, it would be a preposterous condition if such party’s damages should not be given consideration. If the boat had fished, the expense of making a purse seine from the netting would have been borne by the owner and seamen, but in the circumstances there should be added to the damages the amount paid to the seamen, $675, which, added to the $2,500, totals $3,175. This should be offset against the amount of the claim, and, if so offset, there is no recovery.
Before entering decree, the court must determine admiralty jurisdiction. While admiralty does not give equitable relief, it does apply equitable principles, and acts within the sphere of its jurisdiction, and administers justice ex aequo et bono (agreeable to what is good and right). “In deciding ultimate rights of parties from considerations of conscience and justice and humanity, admiralty sometimes mitigates the severity of contract and moderates exorbitant demands.” Benedict on Admiralty (5th Ed.) § 70. The Hiram, 14 U. S. (1 Wheat.) 440, 4 L. Ed. 131; The Virgin, 33 U. S. (8 Pet.) 538, 8 L. Ed. 1036.
Admiralty jurisdiction was heretofore challenged, but on the face of the libel admiralty jurisdiction was stated. The evidence on trial developed a condition which shows that the libel concealed jurisdictional facts, and the prior ruling on the jurisdictional facts does not confer jurisdiction when none in fact existed. Armour and Co. v. Port Morgan Steamship Company, Limited, 270 U. S. 253, 46 S. Ct. 212, 70 L. Ed. 571. The contract to buy fish is not a maritime contract. The Navigadora No. 73 (D. C.) 45 F.(2d) 639. And interrelated with this contract is the guaranty of the libelant to Hendry & Co. for the netting, not maritime. Pacific Surety Co. v. Leatham & Smith Towing & Wrecking Company (C. C. A.) 151 F. 440. The sale of the netting to the Paul L would be maritime, if furnished to and delivered to the boat; but the libelant, if it could be subrogated to the seller of the netting, would have interwoven and interlocked with sale of the netting two nonmaritime contracts— a sale of fish and guaranty for netting. To paraphrase Justice Brandies in Armour & Co. v. Port Morgan Steamship Company, Ltd., supra, the contract to buy the fish and guaranty of payment of the netting and sale and delivery of the netting to respondent all together form one contract, and are not, as a whole, a maritime contract. The three are in one; neither would be complete without the others.
I think, from the conduct of the parties subsequent to the contracts, that title to the netting did not pass to the respondent, and, whatever the arrangement, it was not maritime. Grant v. Poillon, 61 U. S. (20 How.) 162, 15 L. Ed. 871. The relation of the netting to the Paul L at no time was open and obvious. The principle of hypothecation at no time operated. The netting, as furnished to the owner, was not a useful utility, and before it could become such it had to be built into a purse seine, requiring corks, lead, lines, and additional netting, and time to construct. This was all at additional expense of the owner, and while in his possession, and, before contact was made and before lien in admiralty could attach to the vessel, the contract was severed. The netting bears the same relation to the Paul L as though shipped to another port for converting it into a purse seine, when completed to be carried to the Paul L.
The Paul L (D. C.) 59 F.(2d) 223, 1932 A. M. C. 658, has no application here. Nor have the other cases. The netting was not furnished to the boat by the libelants. Admiralty has no jurisdiction, and the libel for that reason is dismissed for want of jurisdiction. It would have to be dismissed in any event from considerations of equitable principles and good conscience. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218957/ | NETERER, District Judge
(after stating the facts as above).
No suit may be removed to the federal court which could not have been originally brought in that court. 28 USCA § 71. In Covington & C. Bridge Co. v. Hager, 203 U. S. 109, at page 111, 27 S. Ct. 24, 25, 51 L. Ed. 111, Justice Day said: “That circuit courts of the United-States have no power to issue a writ of mandamus in an original action brought for the purpose of securing relief by the writ. * * *” See, also, Harley v. Firemen’s Fund Ins. Co. (D. C.) 245 F. 471; State of Washington ex rel. City of Seattle v. Puget Sound Light & Power Co. (D. C.) 243 F. 748. Mandamus is a remedy to compel performance of duty fixed by law; no other adequate remedy being afforded. State ex rel. Krutz v. Washington Irrigation Company, 41 Wash. 283, 83 P. 308, 111 Am. St. Rep. 1019.
The defendant relies upon State of Washington ex rel. Markham v. Seattle, Rai*542nier Valley Railway Co., 2 F.(2d) 264 (D. C., W. D. Wash. N. D.). In that case a writ was sought to compel the raising of the grade of the street ear track as provided by eity ordinance, to conform to grade, and require, in like manner, the same level as the city may provide, and for $1,000 damages. It was shown the necessary expenditure for such work would require the payment of more than $3,000; and the court held that the condition set forth was a nuisance and equity had jurisdiction to abate it, and that, it being a suit between private parties, the relief sought was remedial, involving the expenditure of more than $3,000. In that case the petition was more in the nature of a proceeding for mandatory injunction; and the plaintiff had no other remedy (State v. Hamil, 97 Ala. 107, 11 So. 892; County of San Joaquin, etc., v. Superior Court, 98 Cal. 602, 33 P. 482), and the court properly held that it was a proceeding of a civil nature involving jurisdictional amount, and, diversity of citizenship appearing, the motion should be denied. The court must look to the purpose of the action. State of Indiana v. Alleghany Oil Co. (C. C.) 85 P. 870; State of Iowa v. Chicago, B. & Q. R. Co. (C. C.) 37 P. 497, 3 L. R. A. 554; State of Illinois v. Illinois Central Ry. Co. (C. C.) 33 F. 721. The control of the streets by the city is exclusive, Schoenfeld v. City of Seattle (D. C.) 265 P. 726, and mandamus to repair or improve is not the proper remedy. Nor does State of Washington v. Pac. Tel. & Tel. Co. (D. C.) 1 F.(2d) 327, aid defendant. In that ease Myers and Phillip were mere employees. They had no interest in the litigation; no control of any matter in issue, and subject to discharge at any time, and the company could not be bound by decree against them. Geer v. Mathieson Alkali Works, 190 U. S. 428, 23 S. Ct. 807, 47 L. Ed. 1122. Not so in the instant case. The defendant president and secretary are the real offenders.
The plaintiff as a stockholder had the right to inspect the records of the company (Rem. Comp. Stat. Wash. § 3827), and the president and secretary, being in the custody and control thereof, may not arbitrarily deprive the'plaintiff of such right. The inconvenience or expense incident to the inspection is not a recovery sought by the plaintiff, is not an issue involved, and is purely an incident of the litigation as pertains to all controversies.
Nor is the issue separable. The .president and secretary, custodians of the involved records, are proper parties. The records are lawfully in their custody. The corporation can act only through its officers, and the officers, who have custody of the records, are proper, if not necessary, parties. Harley v. Firemen’s Fund. Ins. Co., supra, and State of Washington ex rel. City of Seattle v. Puget Sound Light & Power Co., supra, disposed of every issue in this case. See, also, Greenough v. Independence Lead Mines Co. (D. C.) 45 F.(2d) 659.
The motion to remand is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218958/ | UNDERWOOD, District Judge.
Petitioner was, prior to his conviction upon the indictment involved in this ease, in-dieted and convicted upon an indictment in the District Court of the United States for the Southern District of Iowa, Central Division. The indictment contained six counts and charged petitioner, in count 1, with having, on the 13th day of November, 1920, unlawfully, willfully, and feloniously stolen and carried away from an authorized depository for mail matter, to wit, United States railway mail ear, one certain mail bag, “which said mail bag is more particularly described as follows, to-wit: mail bag bearing label ‘New York, New York, from San Francisco, Cal.,’ closed by rotary lock P 4118' — 471”; and in counts 2, 3, 4, and 5 with likewise having stolen a mail bag, a separate bag being described *543in the eounts respectively, to wit, in count 2, a “mail bag bearing label ‘Pittsburg & Chicago train 22, from Omaha Ogden train. 6 East Division,’ closed by rotary lock X 5523— 759”; in count three, a “mail bag bearing label, ‘Washington D. C., from Salt Lake, Utah,’ closed by rotary lock B 8286 — 457”; in count 4, a “mail bag bearing label ‘New York & Chicago R. P. 0., from Salt Lake, Utah,’ closed by rotary lock It 8881 — 865”; in count 5, a “mail bag bearing label ‘Chicago, 111., from San Francisco, Cal.,’ closed by rotary lock R 4875' — 639.” In count 6 he is charged with having stolen “from an authorized depository for mail matter, to-wit: a United States railway mail ear, five certain other mail bags, a more particular description of which is to these grand jurors unknown.”
Sentences were imposed on the above-mentioned indictment and petitioner was imprisoned in the United States penitentiary at Leavenworth, Elan. At the expiration of five years of petitioner’s term he was released under writ of habeas corpus because of error in the judgment imposing the sentences. The sentences imposed on the several eounts were held to run concurrently, and therefore the maximum that could be imposed on one count represented the maximum time he could be required to serve on all the eounts.
Subsequently petitioner was tried upon a second indictment, the one upon which his present sentence was imposed and which he now attacks in this proceeding. This indictment is in four counts and involves the same mail robbery, and is claimed by petitioner to refer specifically to four of the mail bags described in count 6 of the first indictment.
Petitioner maintains that his sentences upon the four eounts of the second indictment are invalid because they are for the same offenses charged in count 6 of the first indictment, and that he has already been convicted and sentenced on said sixth count and has served the sentence imposed.
Assuming that the bags referred to in the second indictment are four of the same bags referred to in the sixth count of the first indictment, as alleged in the petition, nevertheless the offenses charged are different and require different evidence to establish them, since the offense charged in the sixth count of the first indictment was the theft of the mail bags, while'the offenses charged in the second indictment are the abstraction of mail matter from these bags.
It will be seen, therefore, that the evidence necessary for conviction under the second indictment was different. Petitioner might have stolen the bags themselves and never opened them or taken out any of the mail matter. They might have been abandoned, returned, or captured before any mail matter was abstracted therefrom, and still the accused would be guilty of the offense of stealing the bags.
On the other hand, the bags might have been stolen by some one else or not stolen at all, and still have had their contents rifled by petitioner in such manner as would constitute the offense charged in the second indictment.
It follows that the offenses charged in the second indictment may have been a part of the same transaction upon which count 6 of the first indictment was based, yet, under the striet rules covering claims of double jeopardy set out in decisions of the United States Supreme Court, the necessity for additional proof compels the finding in this case that the offenses charged in the second indictment are not the same as that alleged in count 6 of the first indictment, and that the sentences attacked in this application for a writ of habeas corpus are not invalid for any of the reasons alleged. Morgan v. Devine, 237 U. S. 632, 35 S. Ct. 712, 59 L. Ed. 1153; Albrecht v. United States, 273 U. S. 1, 47 S. Ct. 250, 71 L. Ed. 505; Burton v. United States, 202 U. S. 344, 26 S. Ct. 688, 50 L. Ed. 1057, 6 Ann. Cas. 362; Badders v. United States, 240 U. S. 391, 36 S. Ct. 367, 60 L. Ed. 706; Ebeling v. Morgan, 237 U. S. 625, 35 S. Ct. 710, 59 L. Ed. 1151; Van Meter v. Snook (C. C. A. 5th) 15 F.(2d) 377.
This precise question was decided contrary to petitioner’s claim by the Circuit Court of Appeals for the Eighth Circuit on his appeal to that court. Poffenbarger v. United States (C. C. A.) 20 F.(2d) 42.
The law may be harsh, but this court has no power to change it or the construction placed upon it by the above decisions. Petitioner’s remedy, if he is entitled to any relief, is by application for executive clemency.
Whereupon it appearing to the court that the sentences complained of, based' on the four counts of the second indictment, are valid and within the limits authorized by law, it is considered, ordered, and adjudged that said writ of habeas corpus be and the same is hereby discharged and petitioner remanded to the custody of respondent. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218960/ | LOWELL, District Judge.
This ease involves a deficiency tax imposed by the Commissioner of Internal Revenue. The question arises out of the incorporation of Thompson’s Spa, which was a partnership of three men, the plaintiff and his two brothers, each owning a one-third interest. The brothers also owned the en*546tire stock of the Sumner Company, which owned the real estate used in the business. In the fall of 1928 the plaintiff and his brothers entered into an arrangement with Hale, Waters & Co. for the incorporation of Thompson’s Spa and the sale of some of its stock to the public. The steps were as follows:
On November 8| the three partners formed a company called the Coleman Company and put in $300. Later on the name of this company was changed to Thompson’s Spa, Inc., and the three partners invested $15,-000 in that company, for whieh they issued to themselves its entire stock, making the total amount invested $15,300. Shortly before this second step the partners had agreed with Hale, Waters & Co. to transfer to the new company all the business of Thompson’s Spa and all the assets of the Sumner Company, and then transfer to Hale, Waters & Co. all the preferred shares of Thompson’s Spa, Inc., together with certain of the common shares. The brothers each owned 390 shares of the Sumner Company, which was its entire capitalization. For these 390 shares, except 30 shares which the plaintiff transferred to his wife, the plaintiff became entitled upon the liquidation of the Sumner Company to preferred shares in Thompson’s Spa, Inc., which he ordered delivered to Hale, Waters & Co., and for whieh he received cash. The assets of the Sumner Company had previously been transferred to Thompson’s Spa, Inc., for preferred shares in the latter company. This gift, to the plaintiff’s wife raises one of the questions involved in the present suit. The plaintiff and his brothers also transferred to the new company all the good will and assets of the partnership of Thompson’s Spa.
The main question arises on the shares of common stock in Thompson’s Spa, Inc., still held by the plaintiff. As one of the steps in the transaction, the three brothers had agreed to manage Thompson’s Spa, Inc., for three years, and kept to themselves the majority of the common stock of the corporation so that they might control it. The ease arises on an agreed statement of facts, from whieh it appears that at the time of the issue to the plaintiff and his brothers of the common stock of Thompson’s Spa, Inc., the only value then represented by this stock was $15,300, as the business of Thompson’s Spa had not then been transferred to it. This stock was worth 10 cents a share. After the transaction with Hale, Waters & Co. was completed the common stock still held by the plaintiff and his brothers was worth $10.70 per share. The plaintiff made a return showing only the profits on the preferred stock of Thompson’s Spa transferred to Hale, Waters & Co. The Commissioner imposed an additional tax, whieh the plaintiff paid under protest. It is conceded that the method of arriving at this additional tax was incorrect, as the real facts were not then known.
This is a suit to recover the deficiency tax. The government’s answer is that under the doctrine of Lewis v. Reynolds, 284 U. S. 281, 52 S. Ct. 145, 76 L. Ed. 293, the plaintiff cannot recover, although the tax imposed was illegal if under a proper theory of taxation a greater amount of tax was due, although it cannot now be recovered, as the statute of limitations has run. The plaintiff does not controvert this contention, but insists that under no circumstances would a tax be legal which was greater than that due as shown by his return.
The plaintiff’s argument, as I understand it, is that, while the plaintiff now has shares of stock worth $10.70 whieh were worth only 10 cents before the transaction took place, this additional value in the common shares was not received by him as a result of the transaction, and no profits have been realized. See Revenue Act 1928, § 111 (c), 26 USCA § 2111 (c). The argument seems to me a specious one, without solid foundation. To support it, the plaintiff contends that before the transaction took place the plaintiff had shares of stock worth 10 cents, and afterwards he had the same shares of stock on whieh he has not realized any profit. The fallacy of the argument is that before the transaction took place the plaintiff had no shares of stock whatever, but merely a one-third interest in the partnership of Thompson’s Spa and a one-third interest in the Sumner Company. The formation of the Thompson’s Spa Company and the issue of the preliminary shares to the plaintiff and his brothers was but a step in the whole transaction, by which the plaintiff profited by the sales of shares of the common and preferred stock, and also by the increased value of the common stock held by him. Carter Publication v. Commissioner, 28 B. T. A. - (decided May 23, 1933); Connecticut Power Co. v. Commissioner, 28 B. T. A. - (decided May 5, 1933); Redington v. Commissioner, 25 B. T. A. 707, 712.
The case of Fraser v. Nauts (D. C.) 8 F.(2d) 106, relied on by the plaintiff, is not in point. The question there was whether a *547sale of lumber was made in a certain way purposely to cheat the government. Instead of selling it outright for $525,000, a lumber dealer sold the lumber on hand for $250,-000, sold the good will of his business for $100,000, and transferred the lease of his lumber yard, which was useful to the purchaser, at such a price that the total paid by the buyer was $525,000. The judge held that this was not a scheme to defraud the government. The ease would be in point were it the contention of the government that the steps in the transaction of selling shares of Thompson’s Spa, Inc., to the public were taken in such a-manner as purposely to defraud the government of part of a tax. There is no such contention in the present ease.
There remains the question of the tax on the profits on the shares of preferred stock in Thompson’s Spa, Inc., representing the 30 shares of Sumner Company given by the plaintiff to his wife. The government’s contention is that the plaintiff cannot escape this tax, because he had already entered into a binding agreement to transfer these shares to Hale, Waters & Co. On this branch of the case I rule that the tax is illegal. The plaintiff agreed “to deliver and sell and/or to cause the corporation to deliver and sell” these shares. Under these circumstances his obligation to Hale, Waters & Co. would have been fulfilled by causing the corporation to deliver the shares, and there was no binding contract that he himself should deliver them. Under these circumstances it seems to me that the gift to Mrs. Baton was properly made, and that the plaintiff acquired no profit on the shares representing this gift.
On the entire case I rule that the tax imposed was less than one which might have been levied, and, although this greater tax is now outlawed, the plaintiff cannot recover. Lewis v. Reynolds, 284 U. S. 281, 52 S. Ct. 145, 76 L. Ed. 293. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218961/ | JAMES, District Judge.
National Thrift Corporation, now a bankrupt, conducted a business of marketing securities of its own which it sold under the various names of “thrift certificates, bonds, annuities, and contracts.” It appointed, by. an instrument in writing, Title Insurance & Trust Company, as trustee to hold securities to be deposited by it, for the protection and liquidation of the obligations referred to. The instrument was lengthy and the obligation of the thrift corporation was to see that at all times there was in the hands of the trustee sufficient securities, mortgages, etc., to protect the trust. Its obligation was to see that the interest was paid on such mortgage securities; also taxes. The trust instrument provided that in ease of default in the obligations of the thrift corporation, the trustee should have the right, upon the request of holders of securities to the amount of 25- per cent, of the total aggregate of principal of said securities, to proceed to sell the security property held in trust and apply the proceeds in satisfaction of the obligations held by the purchasers of the bonds, certificates, annuities, etc. One of the events which it was provided would give the trustee the right to so act was the insolvency of the thrift corporation.
. The suit here is on hehalf of the plaintiffs who allege that they are the holders of certificates of indebtedness of the thrift corporation in excess of $3,000 and that the action is brought on behalf of all holders of such obligations in whatever name issued. It is alleged that the thrift corporation is in bankruptcy and has failed to pay taxes or interest on the security mortgages held by the trastee, and that such securities have depreciated in value so as not to be sufficient to cover the principal of the indebtedness for which they were deposited; further, that plaintiffs are entitled to have an accounting rendered; further, that there is no person authorized to colleet the principal or interest of the securities held in the trust estate, or to foreclose mortgages or trust deeds, or to purchase for the benefit of the trusts the property covered by any mortgage or trust deed, in the event the' same should be sold. A receiver is asked for pending the termination of the cause. The trustee under the trust instrument makes no special opposition to the granting of the petition for the appointing of a receiver. It is made to appear that such trustee is not empowered to purchase in separate parcels the property covered by the mortgage securities held in the trust, and for that reason alone, with the depreciated condition of such securities, a loss would be suffered by the investors. It is represented, and is undoubtedly true, that a receiver can operate the trust and dispose of properties therein to much greater' financial advantage than can the trustee with his limited powers.
The trustee in bankruptcy of the thrift corporation takes the position that he is entitled to take charge of the property in the trust, as the ownership of the securities held therein was in the thrift corporation and so continued. He argues that under the Bankruptcy Law (11 USCA) the title to all property of the bankrupt immediately descends to' the trustee. As to this contention there can be no doubt. However, the property held by the trustee of the trust was deposited there' as security for the benefit of the holders of obligations of the thrift corporation. The trust contract not only specifically so provides, but also provides for the liquidation of the trust by the trustee upon any default being committed by the thrift corporation. Under no view of the matter can the trustee in bankruptcy be allowed to take from the trustee and administer as a part of the bankrupt estate the property so impressed with the lien. A somewhat similar situation arose in the case of Bank of America National Trust & Savings Association, Trustee under a Certain Trust Indenture, v. Ashby Turner, Trustee in Bankruptcy of Bastanchury Corporation, 62 F.(2d) 537, 542, decided by the Circuit Court of Appeals for this circuit on December 12, 1932. There the trustee for bondholders claimed the right to have possession of the real property securing the bond issue, as provided in the trust instrument. The trustee in bankruptcy contended that he had the right to take possession of the same. The court said:
“The rule contended for by appellee, that, according to California law, the trustee in a trust indenture is the agent for both the trus*554tor and the beneficiary, is subject to qualifications.
“To be sure, he is the agent o£ both for certain purposes. After default by the trustor, the trustee in possession must manage and control the property to the best interest of all concerned, must give a strict account of moneys collected, and must pay over to the trustor any surplus remaining in his hands after the sale of the property. But this relation does not, in our opinion, prevent the trustee under a trust indenture, sueh as the one here in question, after default by the trustor, from holding the property as an adverse claimant, within the meaning of the Bankruptcy Act, or from foreclosing the indenture according to the terms thereof. After default, the trustee is an agent of the trustor to a limited extent only, and the trustee’s duties and powers are those prescribed by the instrument itself. By that instrument the purchaser authorizes the trustee, after default, to enter upon the premises, dispossess the trustor, and dispose of the property in •accordance with law and the powers contained in the instrument.”
The trustee in bankruptcy has only the right to receive the overplus, if any, that there may remain after the obligations created by the trust are satisfied. The trustee in bankruptcy has no right to administer the trust because no sueh power is included within the contract terms. The trust instrument not only provides for the liquidation of the trust property upon the default of the trustor, but provides further that the trustee may have recourse to all of the property of the trustor and to have a receiver thereof appointed wherq default occurs. The situation, as before mentioned, is that the rights and interests of the holders of securities are jeopardized; the trustee is, because of limited powers, unable to properly protect those interests. As the trustee does not question its inability to handle 'the trust property to the best advantage of the security holders, and the fact appearing that there is likely in any event to be substantial loss to such security holders, the ease seems an appropriate one wherein a disinterested receiver should be appointed. How that receiver shall proceed in the management of the trust will, of course, be regulated by orders of the court.
It is ordered that Frank C. Mortimer be, and he is, appointed receiver pendente lite of National Thrift Corporation Trust No. B-5918, with bond in the sum of $50,000, which shall be increased at any time it is shown that the receiver has in his hands money in excess of said amount. A written order of appointment with specific terms shall be prepared. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218962/ | KENNERLY, District Judge.
Defendant the city of Sherman, Tex., is a municipal corporation existing under the laws of Texas, and situated in this district and division. Plaintiff, the Northern Texas Telephone Company, is a Texas corporation, with its domicile in the city of Sherman. Plaintiff" owns, and under a franchise from the city of Sherman, dated February 24, 1930, operates, a telephone exchange system there, furnishing telephone service to its inhabitants and others. April 10, 1933, the city commission of Sherman passed an ordinance, reducing the rates permitted and allowed to be charged by plaintiff for such telephone service. Complaining that such reduced rates are not fair and reasonable, but are confiscatory, etc., plaintiff, 'May 1, 1933, filed its bill in equity, against the city, its city commission, and city manager, seeking a temporary restraining order, a preliminary injunction, and, on final hearing, permanent injunction (28 USCA § 381), restraining the enforcement of such ordinance and such reduction of the rates. After a hearing, a temporary restraining order was granted, May 6,1933, by Hon. Randolph Bryant, judge of this court, and it is still in force. This is a hearing of plaintiff’s application for preliminary injunction on plaintiff’s bill, defendants’ motion to dismiss and answer, and affidavits.
Plaintiff’s bill sets forth: That Sherman is a Texas municipal corporation of more than 5,000 inhabitants, and in March, 1915, adopted a special charter under which it is operating, and that it is a home rule city under title 28, chapter 13, Revised Civil Statutes of Texas of 1925 and amendments (Vernon’s Ann. Civ. St. Tex. art. 1165 et seq.). That, under the provisions of such charter and the law governing such cities, the city commission of Sherman has the right to fix fair and reasonable rates to be charged by plaintiff for telephone service in Sherman. That April 10, 1933, such commission passed Ordinance No. 1470, wherein and whereby sueh rates were largely and materially reduced, and were fixed at a monthly charge of $5 for each private business telephone, $1 for each business extension telephone, $2.25 for each private fine residence telephone, $1.75 for each party line residence telephone, $.50 for each private residence extension telephone. That the present fair value of all the property of plaintiff used and useful in rendering exchange telephone service in Sherman is not less than $375,644, and that it is necessary for plaintiff to set aside each year not less than $17,709.29, as a reserve to take care of accruing depreciation on such of said property as is depreciable. That, if plaintiff is required to charge and collect the rates fixed by Ordinance No. 1470, it will result in such a reduction in its revenue and earnings that, after deducting the cost and expense of the most economical operation of such exchange, etc., and lawful depreciation, etc., there will be left only an income equivalent to an annual return of 2.45 per cent, on the present fair value ($375,644), whereas heretofore, over a period of four years, there has been left under present rates, and similar depreciation and economical management, income equivalent to an annual return of 5.78 per cent, on such value, and plaintiff is entitled to income equivalent to an 8 per cent, annual return on such value.
Plaintiff, in its pleadings, sums up the result as follows: “That said rates prescribed in said Ordinance are each and all inadequate and unreasonable and so low as to be confiscatory and so as to deprive plaintiff of its property used and useful in furnishing local exchange service at said exchange without due process of law and to deny plaintiff the equal protection of the law, all in violation of the Fourteenth Amendment to the Constitution of the United States; that plaintiff ought not to be required to furnish telephone service at said exchange for such inadequate, unreasonable and unlawful rates.”
1. Defendants have filed motion to dismiss and answer Equity Rules 29 and 30 (28 USCA § 723). Because of plaintiff’s insistence that its bill shall be deemed confessed (Equity Rule 30), and in the interest of orderly presentation of cases to the court, it is felt that some observations should be made respecting defendants’ -pleadings.
Equity Rule 29 provides that every defense in point of law arising upon the face of the bill, whether for misjoinder, nonjoinder, or insufficiency of fact to constitute a valid cause of action in equity, shall be made by motion to dismiss or in the answer. The grounds of defendants’ motion to dismiss are not so clearly and succinctly stated as the rules require.
*556Equity Rule 30 provides that defendant, in his answer, shall set out in short and simple terms his defense to each claim asserted in the bill, omitting mere statements of evidence, and avoiding general denials, but specifically admitting, denying, or explaining the facts upon which the plaintiff relies, unless he is without knowledge, in which event he shall so state, and this shall be treated as a denial, etc. Defendants follow their motion to dismiss (contained in paragraph I) with their answer (paragraphs II, III, IV, V, and VI), in which they fall far short of compliance with Rule 30. Eor that reason, plaintiff, as stated, seeks to have its bill deemed confessed. If this was not a case involving rights of the public, I would feel inclined to so treat defendants’ answer. But the court has wide discretion in such matters, and defendants will only be required to file pleadings in compliance with the rules, before final hearing on the merits.
2. The first ground of defendants’ motion to dismiss is that plaintiff has a plain, adequate, and complete remedy at law, and therefore, has no standing in this, a court of equity. In such motion, in the argument at the bar, and in the briefs, defendants point to the district court of Grayson county, in which county the city of Sherman is situated, as the tribunal where plaintiff may have its remedy at law. And in the argument at the bar and in the briefs defendants rely upon article 1125 et seq., Texas Revised Civil Statutes of 1925, as pointing out the remedy at law.
I am cited to no Texas case where the precise point is decided, but an examination of such articles1 (articles 1125, 1126, 1127, 1128, 1129, 1130, 1131, 1132) convinces me that the jurisdiction of a state district court may be invoked thereunder only by a city, and/or its governing body, and not by a utility. The Texas eases arising under such articles (Fink v. City of Clarendon [Tex. Civ. *557App.] 282 S. W. 912, 913; City of Uvalde v. Uvalde Electric & Ice Co. [Tex. Civ. App.] 235 S. W. 625, 626) are eases in which the city, or its governing body, moved, and not the utility. In the case last mentioned, while the question was not before the court, Judge Ely, of the San Antonio Court of Civil Appeals, uses this language (italics mine): “Article 1025 declares extortionate and unreasonable rates charged by public utility companies unlawful, and district courts are given full power to regulate, prevent, and abolish the same. Article 1026 provides the method to be followed by the city in invoking the powers of the district court.”
It is clear that, under such articles, plaintiff has no remedy at law.
This view renders it unnecessary to decide the other questions raised regarding such articles.
It is true, of course, that this court and the district court of Grayson county, as courts of equity, have concurrent jurisdiction of plaintiff’s bill attacking such Ordinance No. 1470 and the rates fixed thereunder as confiscatory, etc., but it is well settled that plaintiff may elect to proceed here instead of there.
3. Plaintiff, in its bill, alleges that it has, at this time, approximately 2,361 telephone subscribers in the city of Sherman, and the average monthly bill of each is not more than $3.50, that, notwithstanding such Ordinance No. 1470 is confiscatory, as claimed, defendants will, unless enjoined, undertake to enforce it against plaintiff, and that such subscribers, or many of them, will refuse to pay their monthly bills under the present rates, and there will be no practical way whereby plaintiff may collect same, except by refusing service to such customers, which will give rise to a multiplicity of suits, and plaintiff will be put to the necessity and expense of defending such suits, etc.
In the second ground of defendants’ motion to dismiss, they deny this, and allege that such allegation or elaim should not be considered by this court “for the purpose of invoking the Jurisdiction in this Court.” Such denial, of course, has no proper place in a motion to dismiss. Equity Rule 29. It is also true that the allegations in plaintiff’s bill are admitted by the motion to dismiss. See Hill v. Wallace, 259 U. S. 61, 42 S. Ct. 453, 66 L. Ed. 827.
The jurisdiction of this court, under subdivision 1, § 41, title 28 USCA, clearly appears from plaintiff’s bill, alleging that it will be, and is about to be, deprived of its property without due process of law, in violation of the Fourteenth Amendment to the Constitution of the United States, and the allegation as to the multipliciy of suits is not, I take it, intended to confer jurisdiction on this court, but as one of several allegations invoking the equity powers of the court. See 21 Corpus Juris, pp. 72-82.
4. The last ground of defendants’ motion to dismiss is that plaintiff should be denied all relief prayed for, because of the provisions of plaintiff’s franchise. Apparently the elaim is that the franchise contains provisions which estop plaintiff from complaining of the rates fixed by Ordinance No. 1470 and that same are unfair, unreasonable, and confiscatory. This question, under the wording of plaintiff’s bill, may not be raised by motion to dismiss. See Equity Rule 29. And if by the exercise of great liberality towards defendants’ pleadings, such ground for dismissal be regarded as a part of defendants’ answer, there is no evidence offered by either party on this hearing which sustains defendants’ contention.
5. Construing defendants’ motion to dismiss as testing the sufficiency generally of plaintiff’s bill, although it probably does not have that effect, and considering plaintiff’s bill as admitted, on such motion to dismiss (Hill v. Wallace, supra), I think it clear that under the authorities, plaintiff’s bill shows, upon its face, both jurisdiction here and equity.
6. In paragraph 11 of defendants’ answer,, they bring forward the claim that, even *558though the rates fixed by Ordinance No. 1470 are confiscatory, plaintiff has heretofore obtained an increase or increases in rates upon an agreement or agreements to make certain additions to, and improvements of, its properties, which it has failed to do. Without regard to what the evidence may be on final hearing on the merits, there is neither sufficient evidence here now of such an agreement or agreements, nor of plaintiff’s failure to comply therewith, to justify or support a finding in defendants’ favor on that issue. Besides, it is clear that the property of a utility may not be confiscated because of its failure to comply with an agreement or agreements such as it is claimed existed. Newton v. Consolidated Gas Company, 258 U. S. 176, 42 S. Ct. 264, 66 L. Ed. 549; City of Amarillo v. Southwestern Telegraph & Telephone Company (C. C. A.) 253 P. 638, 639.
7. Treating the remaining portions of defendants’ answer as putting in issue all the allegations of plaintiff’s bill, and considering the evidence offered by the parties in the light of the authorities, including one of the latest decisions of the Supreme Court, strongly presented by defendants (Los Angeles Gas & Electric Corporation v. Railroad Commission, 289 U. S. 287, 53 S. Ct. 637, 77 L. Ed. 1180, decided May 8, 1933), I think what is said by the Supreme Court in Ohio Oil Company v. Conway, 279 U. S. 814, 49 S. Ct. 256, 73 L. Ed. 973, is peculiarly applicable:
“The application for an interlocutory injunction was submitted on ex parte-affidavits, which are harmonious in some particulars and contradictory in others. The affidavits, especially those for the defendant, are open to the criticism that on some points mer.e conclusions are given, instead of primary facts. But enough appears to make it plain that there is a real dispute over material questions of fact, which cannot be satisfactorily resolved upon the present affidavits, and yet must be resolved before the constitutional validity of the amendatory statute can be determined.
“The statute provides for the enforced payment of the tax quarterly in each year. If the tax be paid during the pendency of the suit, and the statute be adjudged invalid by the final decree, the plaintiff will be remediless. The laws of the state afford no remedy whereby restitution of the money so paid may be enforced, even where the payment is under both protest and compulsion.
“Where the questions presented by an application for an interlocutory injunction are grave, and the injury to the moving party will be certain and irreparable, if the application be denied and the final decree be in his favor, while if the injunction be granted the injury to the opposing party, even if the final decree be in his favor, will be inconsiderable, or may be adequately indemnified by a bond, the injunction usually will be granted. Love v. Atchison, Topeka & Santa Fe R. Co. (C. C. A.) 185 F. 321, 331, 332.”
Reserving for determination on final hearing on the merits the issues of fact raised, it is sufficient to say now that, under the rule just stated (Ohio Oil Company v. Conway, supra), plaintiff is entitled to preliminary injunction as prayed for, upon insuring by bond'and/or deposit of funds (see 28 USCA § 382; San Francisco Gas & Electric Co. v. City and County of San Francisco [C. C.] 164 F. 884; City of Amarillo v. Southwestern Telegraph & Telephone Co. [C. C.] 253 P. 638, 639) the payment to defendants of such costs and damages as may be incurred or suffered by them and the repayment to plaintiff’s subscribers of the difference between the amounts already or hereafter paid plaintiff subsequent to the passage of such Ordinance-No. 1470, under the present rates, and the rates fixed by such ordinance, in the event such restraining order and preliminary injunction are finally adjudged to have been wrongfully issued.
"Art. 1125. (1025) Excessive rates. — All extortionate and unreasoñable rates charged by public utility corporations, as hereinafter defined, are hereby declared to be unlawful; and the district courts of this State are hereby vested with jurisdiction and full power and authority to regulate, prevent and abolish the same; and said courts are given the power and authority whenever the public interest may require, to fix and establish rates for the service and products of all public utility corporations, and whenever the public interest may require and to carry out the provisions heroin conferred, said courts are hereby expressly authorized to issue injunctions, quo warranto, and all other writs for the purpose of carrying out and making effective the purposes of this chapter, and said writs shall be governed by the rules and regulations now prescribed by law. No proceeding shall be begun in the district court having for its purpose the fixing of rates of public utility corporations until and unless the city council of the city or town desiring to invoJce the power herein conferred upon the district courts shall comply with the provisions of the succeeding article.
"Art. 1126. (1026) Complaint. — If the city council of any city or town incorporated under the general laws of this State, shall desire to invoke the power of the district court granted in the preceding article, such council shall, by a two-thirds vote of all the members elected to said council, pass a resolution setting forth the matters complained of, naming the corporation against which the complaint is made, and in a general way the reasons for such complaint, and shall cause a copy of the same to be delivered to the president, vice president or secretary of said corporation, or cause to be left a copy of said resolution at the principal office of such corporation.
“Art. 1127. (1027) Suit. — If, within twenty days after the said corporation has been furnished with a copy of the resolution of the city council, the wrongs complained of shall not be corrected to the satisfaction of the city council, a petition setting forth the wrongs and grievances complained of, and stating the relief sought, may be filed in the name of the city or town as plaintiff against the corporation as defendant in any district court of the county in which such city or town may be situated. Process shall be issued upon said petition, and be served upon such corporation as now provided by law in civil cases. The case shall be set for trial in the same manner as other civil cases, except that it shall have precedence over all cases of a different character filed in such court as to the time of trial. Process shall issue in said cause in the same manner as process may issue in civil cases. The right of trial by jury of the issues involved shall also be given upon the demand of either party.
“Art. 1128. (1028) Trial. — Upon the trial of the cause, the court or jury, in arriving at a decision as to whether or not the rates complained of are reasonable or extortionate, and in fixing the rates, shall consider the cost of construction of the plant of the public utility corporation against which the petition is filed, the cost of the operation of such plant, its maintenance and repairs, the fixed charges that may be against the corporation, amount invested in such plant, and such other matters as may be material to the issues. The court trying the same shall have the power to order the corporation to make profert of its books and records for inspection in-court in determining the question in issue. After a full hearing of all the evidence adduced, the court or jury shall have power, and it shall be their duty to fix! the rates which may be charged by such public utility corporation; provided, that the rates fixed must be sufficient to yield such public utility company not less than ten per cent upon the investment, and the same shall continue in force for a period of three years. The rates fixed shall be entered of record upon the minutes of the court, and shall be held conclusive, as reasonable, fair, and just, and shall remain for three years as the rates to he charged by such corporation, unless changed or modified by the judgment of said district court, or by the appellate courts to which either of the parties to said suit may appeal, or have writ of error.
“Art. 1129. (1029) Appeal. — If either party to the suit shall be dissatisfied with the decision of the court and the rate thereby established, an appeal may be taken by either party to the proper court of civil appeals, and said appeal shall be at once returnable to said court of civil appeals, and shall have precedence in such court of all cases of a different character therein pending. The parties to said suit may apply to the Supreme Court for a writ of error.
“Art. 1130. (1030) Enforcement. — When the final judgrfient is rendered in any cause fixing the rates to be charged by said corporation, the court rendering such judgment shall order in its decree the enforcement of the same; and is authorized and empowered to provide in its decree that, if the same is not obeyed according to the terms thereof, the said *557corporation shall forfeit its charter if the same he a domestic corporation, or its permit to do business in this State if the corporation be a foreign corporation. If said order or decree be violated, it shall be the duty of the Attorney General, or county or district attorney, under the direction of the Attorney General, to institute suit in the district court of the county in which such corporation may have its principal office, or in Travis County, for the forfeiture of the charter of such corporation, or the cancellation of its permit, as the case may be, and, if said charter be forfeited or permit canceled, the offending corporation shall thereafter be prohibited from carrying on its business within this State.
"Art. 1131. (1031) Corporations affected. — The public utilities included within the meaning of this subdivision are defined to be water companies furnishing water to the public; gas companies furnishing gas to the public, electric light or power companies furnishing light or power to the public; telephone companies furnishing telephones to the public; sewerage companies conducting sewerage for the public, whether said companies are incorporated under the laws of this or a foreign State.
Art. 1132. (1032) Cities affected. — Any city within this State, incorporated under a special law, may at its option, avail itself of the provisions of this subdivision, but the same shall be cumulative of any other method’which may now be provided in such special charter, and this law shall not repeal any provisions of such special charters.” | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218963/ | ATWELL, District Judge.
The West Texas Construction Company is the holder of a certificate of special assessment, issued by the city of Wichita Falls, against the homestead of the bankrupt. It was listed as a creditor, but it took no part in the proceedings.
On October 14, 1932, it received, through the mail, the following notice:
“In the District Court of the United States for the Northern District of Texas, Wichita Falls Division.
“In the Matter of William Frederic Weeks, Bankrupt. No. 601 in Bankruptcy.
“Notice of Proposed Sale.
“Notice is hereby given that Otis E. Nelson, trustee of said bankrupt’s estate, has filed an application to sell twelve and one-half (12%) acres of land out of the S P RR Company Survey No. 1, in Wichita County, Texas, and being known as the W. F. Weeks Home Tract, alleging that an indebtedness of $70,000 to the Great Southern Life Insurance Company, $5000 to lone E. Bushfield, $4,000 to the West Texas Construction Company, $700 to the Fuller Construction Company and the accrued taxes against said land, all of said indebtedness alleged to be secured by a lien upon said tract of land. The trustee prays that said land and premises be sold at public sale, free and clear of liens, exr eept those enumerated.
“On consideration no adverse interests being represented a hearing is ordered on said application before the referee, at his office, 714 Staley Building, Wichita Falls, Texas, at ten o’clock in the forenoon, on the 26th day of October, A. D., 1932, to determine whether or not said land and premises be sold, and if so, whether it should be sold free of, or subject to liens and encumbrances.
“Dated this the 13th day of October, A. D., 1932.
“Walter Nelson,
“Referee in Bankruptcy.”
It allowed the property to be sold, the sale confirmed, and the proceeds distributed without doing anything. In January of the following year, it entered the bankruptcy court and prayed the referee to set aside the ' sale and to revest the property in the trustee, claiming that it was misled by the notice of sale. This the referee declined to do.
In addition to the written notice, the evidence shows that Mr. Mann, an attorney at Wichita Falls, where the bankruptcy proceedings pended, had, from time to time, represented the petitioner. At the hearing on the trustee’s application to sell, Mr. Mann was notified by telephone, and, while he did not represent the petitioner at that particular time in this particular case, he did attend the hearing and subsequently notified the petitioner’s attorney at Dallas that the sale was to be free and clear of all liens except taxes. After the sale was made, the petitioner’s Dallas attorney went to Wichita Falls and inspected the papers in the referee’s office and advised the trustee that he (the trustee) would be informed in a few days whether any proceedings would be instituted to delay the distribution of the funds which were realized at the sale. No such steps were taken, and the moneys were distributed.
The property brought $15,000,' which amount was bid by the Great Southern Life Insurance Company. The fund was distributed, first, to settle the cost of the proceedings; second, to repay the Life Insurance Company $8,382.29, that it had paid on taxes; third, to the Fuller Construction Company, $385; and, fourth, $5,778.02 to the Great Southern Life Insurance Company upon its claim of $50,000.
The West Texas Construction Company was entitled to ten days’ notice by mail of the proposed sale of the property. Section *56058a (4), Bankruptcy Act, 11 USCA § 94 (a) (4). Under the fáets of the ease, unless this notice was given to it, there was no jurisdiction to sell the property free of its liens. Ray v. Norseworthy, 23 Wall. (90 U. S.) 128, 23 L. Ed. 116; In re Martin (C. C. A.) 210 F. 620; inferentially, In re Lake Champlain Pulp & Paper Corporation (D. C.) 20 F.(2d) 425; In re Kohl-Hepp Brick Co. (C. C. A.) 176 F. 340. Perhaps actual notice would not fdl the measure of the statute, Factors’ & Traders’ Insurance Company v. Murphy, 111 U. S. 738, 4 S. Ct. 679, 28 L. Ed. 582, unless the creditor attended the sale and participated therein, In re Caldwell (D. C.) 178 F. 377; Pace v. Berry, 176 Ky. 61, 195 S. W. 131.
It is safe to say that the giving of the notice hy mail was necessary, and that a secured creditor who has not filed or otherwise submitted to jurisdiction must he hrought into the proceedings by such notice; that such a creditor is entitled to the notice before a valid sale free and clear of its liens can be had.
It is contended that the notice, which was duly received and which complied with the time provision of the statute, was confusing, insufficient, and ineffective.
The notice is poorly written. It contains two paragraphs. The first sentence of the first paragraph is incomplete. The second sentence of the first paragraph merely continues the telling of what the trustee had alleged in the petition to sell. The first sentence of the first paragraph mentioned five different liens against the property. The second sentence of that paragraph advised that the trustee was praying that the property be sold at publie sale, free and clear of liens, “except those enumerated.” Petitioner claims that the phrase, “except those enumerated,” related to the five liens mentioned in the first sentence of the first paragraph, but a careful reading of the first paragraph shows that that sentence related to the prayer of the trustee in the petition. The prayer, the petition shows, asked that the property be sold free and clear of the first four liens, but not free and clear of taxes. Petitioner, assuming that its failure to act is due to the wording of the notice, did not read carefully. Neither does the petitioner read carefully in its argument on the present certificate to review. The first paragraph was merely an attempt to photograph something of what was in the trustee’s application to sell.
The second paragraph of the notice, in unmistakable English, advised that a hearing will be had upon the application, at a certain place and hour, “to determine whether or not said land and premises be sold, and if so whether it should be sold free of or subject to liens and encumbrances.” There is no uncertainty about the import of these words. The petitioner was therein nsirified that at a certain time and certain place the referee would pass upon the application of the trustee and would determine whether the property should be sold “free of, or subject to liens and encumbrances.” That was the notice that it received in pursuance to the statutory requirement. It ignored that notice. It stayed away. It took no part in the proceedings. It had ample time, and it was orally urged to make known its position.
A notice is less formal than a citation. A citation or a subpoena or a summons usually have certain statutory requirements that must be met before there is valid service. Generally speaking, says 46 Corpus Juris, 553, when a formal notice is required to be given, it should give the necessary information. It must be clear and explicit and not ambiguous. A notice is not clear unless its meaning can be apprehended without explanation or argument.
There is no apparent ambiguity in the notice under scrutiny. The preamble of the notice which gives some information as to what the trustee is trying to do is poorly worded, but it cannot be said that clearer or more unambiguous phrases could have been used than were used in apprising the petitioner of that which was expected to be done at 10' o’clock in the forenoon, October 26, at the referee’s office. ' At that place and time it was to be decided “whether or not the land and premises be sold,” and “whether it should be sold free of or subject to liens and encumbrances.” McRaney v. Riley, 128 Miss. 665, 91 So. 399, 22 A. L. R. 685; Id., 260 U. S. 727, 43 S. Ct. 90, 67 L. Ed. 484; last paragraph, Hanover National Bank v. Moyses, 186 U. S. 181, 22 S. Ct. 857, 46 L. Ed. 1113.
It would be unfair and would make an improper use of a grammatical error in a descriptive paragraph, to permit it to overturn a direct, clear statement of what was expected to be done as shown in a succeeding paragraph. The word “enumerated” in the first paragraph is used by the petitioner as a modifier of the several liens therein mentioned. That word was used by the referee as referring to the lien securing the taxes in the trustee’s application.
*561If correct grammar were a requisite of validity we might be in a bad plight, quite frequently, in our judicial proceedings.
The main purpose of the statute, the fairness of all of our proceedings, are based upon notice to the one against whom the proceedings are directed. That notice was given in this case. That notiee was ignored. The proceeding being in rem is and was valid.
The petition is denied, and the order of the referee affirmed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218965/ | RAYMOND, District Judge.
This suit was commenced on May 11,1932, by summons. Plaintiff seeks to recover the sum of $375.10 paid to defendant on September 27, 1929, for interest on overassessments for the years 1913, 1914, 1916, and 1919. The matter is before the court upon motion to dismiss, the only substantial ground for the motion being that the alleged cause of action did not accrue within the period of the statute of limitations fixed by 26 USCA § 2610, which reads as follows:
“(a) Any portion of an internal-revenue tax (or any interest, penalty, additional amount, or addition to sueh tax) refund of which is erroneously made, within the .meaning of section 2608, after May 29; 1928, may be recovered by suit brought in the name of the UMted States, but only if sueh smt is begun within two years after the makmg of sueh refund.
“(b) Any portion of an internal-revenue tax (or any interest, penalty, additional, amount, or addition to such tax) which has been erroneously refunded (if such refund would not be considered as erroneous under section 2608) may be recovered by suit brought M the name of the United States, but only if sueh suit is begun before the expiration of two years after the making of such refund or before May 1,1928, wMehever date is later. (May 29, 1928, 8:00 a. m., c. 852, § 610, 45 Stat. 875.)”
Michigan Court Rule No. 18, section 1, provides that defendant may file a motion to dismiss “where any of the said following defects do not appear upon the face of the declaration or bill of complaint * * * (f) That the cause of action did not accrue within the time limited by law for the commencement of an action or suit thereon.”
Prior to the enactment of section 610 of the Revenue Act of 1928 (26 USCA § 2610), it was uniformly held that there was no limitation upon the United States for the commencement of a suit to recover money illegally paid out, for the reason that statutes of limitation do not run against the government. It was held that the government was not bound by any statute of limitation unless Congress had clearly manifested its intention to apply a specific limitation to the government. See United States v. Bartron (D. C.) 35 F.(2d) 765.
It is urged by plaintiff that section 2610 above quoted does not indicate an intention of Congress to apply the statute of limitations to that portion of the money paid by the government to taxpayers which represents *563interest upon taxes refunded. Plaintiff contends that the amount which the United States now seeks to recover was never paid to the United States by the defendant, and that the amount here sought to be recovered was not refunded and is therefore not within the meaning of the statute. Plaintiff concedes that the tax itself may not be recovered, but says that the interest on that tax is not a refund, and that the limitation should not apply-
It has long been the rule that revenue laws are to be.construed strictly in favor of the taxpayer and against the taxing power. See Gould v. Gould, 245 U. S. 151, 38 S. Ct. 53, 62 L. Ed. 211; Hecht v. Malley, 265 U. S. 144, 44 S. Ct. 462, 68 L. Ed. 949. The paramount rule in the construction of statutes is to give effect to the intention of Congress. The language of the statute is not entirely free from ambiguity. It seems to the court that the purpose of Congress was to set at rest all doubt which might otherwise exist as to the right of the government to recover either refunds or interest upon such refunds after a period of two years had elapsed after the making of such payment. To hold otherwise is to say that Congress intended to authorize the recovery of comparatively trivial amounts and the harassing of the taxpayer therefor many years after the payment. The purpose of Congress to set at rest questions regarding such refunds and the interest thereon after the period provided by statute seems to the court to be clear.
It is true that the interest paid by the government did not constitute the repayment of money actually received from the taxpayer. It is equally true, however, that, when the taxpayer paid the several sums in 1913, 1914, 1916, and 1919, it lost the use of the amounts so paid for a considerable number of years, and that plaintiff had the benefit of such use. In other words, the payment of interest was a refunding of actual loss to the taxpayer.
An order will accordingly be entered granting the motion to dismiss. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218966/ | WOOLSEY, District Judge.
This motion to dismiss is granted, without leave to amend.
I. Under the Bankruptcy Act of 1898 (see 11 USCA § 104), an indebtedness to the United States like that in question here has in all respects the same status procedurally in a bankruptcy court as any other indebtedness of a bankrupt. Cf. Guarantee Company v. Title Guaranty Company, 224 U. S. 152, 158 to 160, 32 S. Ct. 457, 56 L. Ed. 706, United States v. Wood, 290 F. 109, 115 (C. C. A. 2). Therefore, a claim must be filed in a bankruptcy proceeding if the United States wishes to enforce its indebtedness.
II. So in this ease the United States, not having filed in the bankruptcy proceeding of the McGovern Trucking Corporation a claim based on its judgment against the bankrupt entered in this court on July 16; 1928, which was frankly scheduled by the bankrupt (cf. paragraph 6 of complaint), cannot after distribution of the bankrupt’s estate hold the trustee thereof personally liable for the *564amount of an indebtedness for which it failed to file claim in the bankruptcy proceeding wherein the bankrupt’s creditors who wished to press their claims were all brought into concourse.
III. The trustee’s knowledge of this claim of the United States, which may be inferred from the fact that it was scheduled, is not sufficient to charge him personally with the payment of it. So to charge the trustee it would be necessary to allege that the United States secured the status of a party to the bankruptcy proceeding by filing a claim therein, which, confessedly, it did not do, then that the claim had been allowed by the referee, and that the trustee had failed or refused to pay it. No wrongful act is alleged against defendant as trustee in this or any other respect.
Certainly a trustee should not be held personally liable after a proceeding in bankruptcy is closed because, in effect, the bankrupt had told him of an indebtedness which the creditor entitled to enforce it had apparently abandoned.
IV. The complaint therefore does not state a cause of action against the defendant, and the facts admitted on argument preclude any amendment by which it can be cured. The complaint will therefore be dismissed without leave to amend.
An order for a judgment of dismissal without costs may therefore be presented to me on the usual notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218967/ | NIELDS, District Judge.
The Eureka Company, the Sayers & Scoville Company, and the Meteor Motor Car Company filed their bill of complaint against Henney Motor Company on the ground of unfair competition. Both Eureka and defendant are licensees of Big Rock Ranch Company, the owner of Heise United States letters patent No. 1,731,391 for an improved hearse.
Defendant in its answer embodies a counterclaim charging that Eureka was licensed by Big Rock only to sell complete hearses manufactured at its place of business; that Eureka had breached that license by manufacturing and selling to the other two plaintiffs parts or incomplete combinations of hearses not in accordance with its license, thereby entailing irreparable damage to defendant ; and further charging that plaintiffs had been guilty of infringement of the Heise patent. Defendant seeks a decree declaring the license of Big Rock to Eureka “terminated” or “if, for any reason, there exists any ambiguity in said license * * * an order be entered reforming said license to properly express” the agreement of the parties.
One ground on which plaintiffs moved to dismiss the counterclaim is nonjoinder of Big Rock, a necessary and indispensable party.
The license is a tripartite agreement. If terminated, Big Rock would lose royalties payable thereunder from Eureka. If the license is reformed, the contract rights of Big Rock are necessarily affected. Obviously Big Rock is a necessary and indispensable party to the case sought to be made by the counterclaim. Shields et al. v. Barrow, 17 How. 130, 15 L. Ed. 158.
Were the counterclaim limited to alleged acts of unfair competition on the part of the plaintiffs the situation might be different.
The counterclaim must be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224456/ | MEMORANDUM & OPINION
JACK B. WEINSTEIN, Senior District Judge:
I. Introduction. 238
II. 239 Facts
A. Plaintiff s Allegations. 239
B. Grievance Procedure . 239
III. Procedural History. 240
IV. Law. 241
V. Application of Law to Facts . 241
VI.Conclusion . 244
I. Introduction
Roy Taylor, an incarcerated pro se plaintiff, brings seven unrelated constitutional claims against various defendants. See 42 U.S.C. § 1983. Most, but not all, of plaintiffs claims assert wrongdoing by jail officials at Rikers Island (“City Defendants”). Defendants moved to dismiss all claims on assorted grounds. See ECF No. 22, Mar. 7, 2013 (statute of limitations); ECF No. 41, June 3, 2013 (failure to state a claim and failure to exhaust administrative remedies). The motions to dismiss were converted to motions for summary judgment at a March 6, 2014 hearing. See ECF No. 68. Defendants have since filed renewed motions for summary judgment. *239ECF No. 69, Mar. 27, 2014; ECF No. 74, Mar. 27, 2014.
Addressed here is City Defendants’ contention that two of plaintiffs claims — (1) jail officials failed to protect him from a beating by other inmates, and (2) jail official used excessive force against him— must be dismissed because plaintiff failed to exhaust administrative remedies.
Objectively, a reasonable person in plaintiffs position would not conclude that there were administrative remedies available before bringing a federal action based on these two claims. Subjectively, plaintiff did not believe that there were such administrative remedies. City Defendants’ motion is denied.
II. Facts
A. Plaintiffs Allegations
Plaintiffs failure-to-protect claim stems from a dispute he allegedly had with jail authorities concerning food service in May 2012. Compl., *6. He was upset that, under the claimed indifferent supervision of Rikers Island officers, members of the Crips gang served him and other non-gang members “tiny food portions while serving gang members large food portions.” Id. Shortly after plaintiff sent an anonymous complaint to the Correction Commissioner, officers assembled the inmates in'plaintiff s housing unit and admonished them collectively: “Someone dropped a slip to central office[,] and when we get heat, the entire unit get heat .... Any inmate believes the above problem is going on speak now.” Id. Plaintiffs complaint does not indicate whether he spoke up.
The day after this chiding, it is alleged that plaintiff and two other non-Crips-affil-iated inmates “were victims of gang assault where [plaintiff] & [another inmate] got cut & stabbed.” Id. While the attack was occurring, plaintiff claims that “[Correction Officer] Morgan allowed the Crips to act with impunity and ... waited 20,to 30 minutes to press the alarm and ... [Correction Officer] Ballart[,] who was in [the] Bubble, failed to open [the] door for our safety when the Crips were jumping on us, and [failed] to use mace to breakup this ‘gang assault.’ ” Id., *7.
Injuries to plaintiffs knees, arm, leg, back, torso, hand, and neck allegedly resulted from the attack. Id, *6.
The excessive force claim arises out of an incident that occurred three months later. Ordinarily, after being escorted from the showers to his locked cell by a jail official, plaintiff would “place[] his hands through the feedup flap to be un-cuffed.” Id., *7. On August 9, 2012, however, he asserts he lost his footing inside the cell in the midst of uncuffing, causing him to withdraw his wrists momentarily from the open slot. Id., *7. According to plaintiff, defendant Correction Officer Benbow “panie[ked]” and “began yanking & pulling cuffs shouting ‘Hell no, your [sic] not taking my cuffs.[’]” Id. Plaintiff yelled out in pain and explained that he had simply slipped, but the officer continued pulling on the cuffs. He asserts that this gratuitous yanking was done “maliciously” and “to cause harm.” Id., *8. Defendant used so much force tugging on the cuffs, according to plaintiff, “that [defendant] scraped chunks of skin off [his] hands and fingers.” Id. His injuries were sufficiently severe, he asserts, to require “transportation] to urgent care at West Facility at Rikers Island for a skin graft.” Doctors treated plaintiffs injuries daily and ordered that he use a sling for a month. Id.
There is no evidence that plaintiff filed grievances related to either of these incidents before bringing this lawsuit.
B. Grievance Procedure
New York City Department of Correction Directive 3375R-A established the In*240mate Grievance Resolution Program in place at the time of plaintiffs alleged injuries. ECF No. 42, June 3, 2013, Decl. in Supp. of City Defs.’ Mot. to Dismiss, ¶ 2; see also DOC Directive 3375R-A, available at http://www.nyc.gov/html/doc/downloads/ pdf/3375R-A.pdf (accessed May 20, 2014).
Under DOC Directive 3375R-A, specified categories of inmate grievances are “Non-Grievable.” See DOC Directive 3375R-A, § II.C. These include the kind of complaints of violence against an inmate made in the above two claims. The policy reads, in relevant part:
Inmate allegations of assault or harassment by either staff or inmates are not grievable under the grievance mechanism .... Since no level of review in the grievance process is adversarial, ány portion of a complaint in which the remedy sought involves the removal of a staff person from an assignment, or the censure, discipline or termination of a staff person, is not grievable. The underlying complaint is grievable unless it constitutes assault, harassment or criminal conduct.
Id., §§ II.C.2-3 (emphasis added).
To initiate a grievance, a prisoner must fill out one of two forms: an “Inmate Interview Slip” (Former # 143, Attachment D) or an “Inmate Grievance Form” (Form # 7101R, Attachment E). The former form instructs inmates to, “State briefly what [they] wish to discuss,” and provides six lines after the prompt: “Please grant me an interview regarding _” Id., Attachment D. The “Inmate Grievance Form” provides five lines on which inmates are instructed: “Please describe problem as briefly as possible.” Id., Attachment E.
Upon receipt of an inmate complaint, jail officials conduct a threshold assessment of whether the matter is grievable. DOC Directive 3375R-A, § IV.B.1.a. Only if a matter is determined “grievable” is the complaint numbered, logged, investigated, and documented. Id. A cognizable grievance then advances to the “First Step” informal and formal resolution stages. Id., §§ IV.B.1.a-d. If a matter is determined to be non-grievable, jail officials “communicate the determination to the inmate, via Form # 7114, Non-Grievable Complaint (Attachment G), along with information on what process is available to address the matter of concern.” Id., §§ IV.B.1.a.
An appeals process exists for inmates who are dissatisfied with the resolution of their grievance after a “First Step” formal hearing. Id., §§ IV.B.1.d.iii., (“Procedure for Filing an Appeal”). It is unclear whether there is an appeal mechanism for an inmate whose complaint is determined to be “Non-Grievable” at the threshold screening stage. Id.
III. Procedural History
City Defendants moved to dismiss the •two claims on the theory that plaintiff failed to exhaust administrative remedies, as required by the Prison Litigation Reform Act (“PLRA”), before filing this action in federal court. See ECF No. 43, June 3, 2013; 42 U.S.C. § 1997e(a). In support of this motion, City Defendants submitted DOC Directive 3375R-A with their memorandum of law. See Decl. of Jeffrey Dantowitz, Ex. 1, ECF No. 42-1, June 3, 2013.
After the motion to dismiss was converted to a motion for summary judgment on March 6, 2014, see ECF No. 68, defendants filed a new memorandum reiterating the previously urged failure-to-exhaust arguments. See ECF No. 72, Mar. 27, 2014. City Defendants again submitted DOC Directive 3375R-A along with their motion for summary judgment. See ECF No. 71-2, Mar. 27, 2014.
*241On April 17, 2014, the court ordered supplemental briefing on the availability of administrative remedies for inmates in New York City Department of Corrections custody. ECF No. 77, Apr. 17, 2014. The parties were directed to language in the grievance procedure addressing “allegations of assault,” and were asked to consider its effect on plaintiffs failure-to-protect and excessive force claims. Id.
City Defendants withdrew their non-exhaustion argument with respect to plaintiffs excessive force claim, conceding that plaintiffs claim against Defendant Benbow “appears to assert an actual [non-grieva-ble] assault by this Defendant.” ECF No. 79, Apr. 25, 2014.
With respect to plaintiffs failure-to-protect claim, however, City Defendants still maintain that plaintiff was obliged to file a grievance. But cf. Oates v. City of New York, 2004 WL 1752832 (S.D.N.Y. Aug. 4, 2004) (“Turning first to the claim that DOC personnel failed to protect the plaintiff from the assault that led to his injuries, defendants now candidly ... concede that this claim could not have been pursued under the DOC grievance procedures.”).
IV. Law
The Prison Litigation Reform Act (“PLRA”) requires exhaustion of available administrative remedies before a federal action can be brought. It reads:
No action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.
42 U.S.C. § 1997e(a). This exhaustion requirement “applies to all inmate suits about prison life, whether they involve general circumstances or particular episodes, and whether they allege excessive force or some other wrong.” Porter v. Nussle, 534 U.S. 516, 532, 122 S.Ct. 983, 152 L.Ed.2d 12 (2002). “Proper exhaustion” generally requires “using all steps that the agency holds out, and doing so properly.” Amador v. Andrews, 655 F.3d 89, 96 (2d Cir.2011) (quoting Woodford v. Ngo, 548 U.S. 81, 90, 126 S.Ct. 2378, 165 L.Ed.2d 368 (2006)).
The law recognizes that there are often “situations in which administrative remedies are not actually ‘available’ under the PLRA.” Abney v. McGinnis, 380 F.3d 663, 667 (2d Cir.2004). The district court “must consider whether administrative remedies were in fact ‘available’ [to the prisoner] in light of his explanation for the alleged failure to exhaust.” Id.
Even in circumstances where “administrative remedies may have been available,” there are “certain ‘special circumstances’ in which ... the prisoner’s failure to comply with administrative procedural requirements may nevertheless have been justified.” Giano v. Goord, 380 F.3d 670, 676 (2d Cir.2004). Where a prisoner’s failure to exhaust available administrative remedies results from the prisoner’s “reasonable [though mistaken] interpretation of [Department of Corrections] regulations,” the exhaustion bar may be excused. Hemphill v. New York, 380 F.3d 680, 689 (2d Cir.2004); Giano, 380 F.3d at 679 (same).
V. Application of Law to Facts
The question whether Rikers Island officials would have accepted a hypothetical failure-to-protect grievance, as City Defendants now urge, is immaterial. A reasonable inmate attempting to follow DOC Directive 3375-R would conclude that no administrative mechanism existed through which to obtain remedies for the alleged attack.
*242There is no dispute that plaintiffs claim concerning the alleged May 2012 attack involves an “allegation of assault ... by either staff or inmates.” See Directive 3375R-A (emphasis added). The grievance policy designates inmate complaints involving such misconduct as “Non-Grievable.” Id.
City Defendants nevertheless insist that administrative remedies would have been available to plaintiff had he filed a grievance, and that plaintiff was obliged to exhaust prison channels as a prerequisite to bringing constitutional claims in federal court. Their argument hinges on the meaning of the word “of.” An earlier iteration of DOC Directive 3375-R promulgated in 1985 provided that “[a]mong the issues that are non-grievable are ... complaints pertaining to an alleged assault or verbal harassment”; the newer directive declares non-grievable “inmate allegations of assault or harassment.” ECF No. 79, *3 (emphasis added). “[WJhile Plaintiffs allegations might ‘pertain to’ an assault,” City Defendants contend, “they do not constitute allegations ‘of assault’ by these Defendants.” Id. (emphasis added). “Of,” they insist, was intended to signify “a much narrower type of conduct that is non-grievable.” Id.
Lay inmates — many ill-educated or with mental health problems — cannot be expected to interpret regulations with the historical knowledge available to counsel or with the degree of semantic nuance upon which lawyers are trained to rely. Cf. David v. Heckler, 591 F.Supp. 1033, 1043 (E.D.N.Y.1984) (emphasizing the need for government to use language in directives that is understandable to those affected). See also City of New York, Educational Expansion on Rikers Island, at http://www.nyc.gov/html/ceo/html/ initiatives/justice_rikers.shtml (“On a typical day in FY07, 96% of eligible inmates aged 19-24 did not attend school while in custody on Rikers Island. The majority of 19-21 year old inmates on Rikers Island are junior high or high school dropouts with poor reading and writing skills.”); Michael Schwirtz, Rikers Island Struggles With a Surge in Violence and Mental Illness, N.Y. Times, Mar. 19, 2014, at A1; Garner’s Dictionary of Legal Usage 628 (3d ed. 2011) (“However innocuous it may appear, the word of is, in anything other than small doses, among the surest indications of flabby writing .... The only suitable vaccination is to cultivate a hardy skepticism about its utility in any given context.”).
City Defendants’ position also overlooks the remaining text of the “Non-Grievable Issues” section of the Directive. As already noted above, see Section II.2, supra, immediately after explaining that an “allegation of assault ... by either staff or inmates” is non-grievable, the Directive elaborates that an inmate complaint “is grievable unless it constitutes assault, harassment or criminal misconduct.” DOC Directive 3375R-A, § II.3 (emphasis added).
The sort of wrongdoing alleged by plaintiff in this civil action — that defendants acted with deliberate indifference to serious harm suffered because of an ongoing gang assault — is criminal misconduct. See 18 U.S.C. § 242; United States v. Gray, 692 F.3d 514, 518 (6th Cir.2012) (upholding criminal conviction under Section 242 for deliberate indifference to prisoner’s welfare); United States v. Gonzales, 436 F.3d 560, 573 (5th Cir.2006) (same); United States v. Walsh, 27 F.Supp.2d 186 (W.D.N.Y.1998) (same). City Defendants’ insistence that plaintiff could have grieved his failure-to-protect claim denigrates and disregards 18 U.S.C. § 242, one of the few weapons in “the entire arsenal of criminal laws available to the federal government to *243punish those who deprive others of civil rights secured by the Constitution or federal law.” See Arthur B. Cladwell and Sydney Brodie, Enforcement of the Criminal Civil Rights Statute, 18 U.S.C. Section in Prison Brutality Cases, 52 Geo. L.J. 706 (1964). Allegations like those brought by plaintiff must be understood for what they are: accusations of civil delicts and criminal misconduct.
At the most general level, City Defendants’ contention that administrative remedies were “available” — provided plaintiffs grievance artfully specified that he was not complaining “ ‘of assault’ by these Defendants,” see ECF No. 79, *3 (emphasis added) — misapprehends the basic structure of the Rikers Island grievance procedure. Their argument presupposes that a grievant brings an allegation “of assault” against an individual defendant or wrongdoer. But such a practice is foreign to the grievance procedure. Prisoners submit forms that require them to “State briefly what [they] wish to discuss” and to “Please describe problem as briefly as possible,” see DOC Directive 3375R-A, Attachments D and E, not to makes charges against particular individuals. Compare DOC Directive 3375R-A, § II.C.3. (“Since no level of review in the grievance process is adversarial, any portion of a complaint in which the remedy sought involves ... the censure, discipline or termination of a staff person is not grievable”) with Fed.R.Civ.P. 10(a) (“Every pleading must have a caption with ... a title [that] must name all the parties[.]”).
Any grievance that plaintiff might have filed in connection with the May 2012 attack would have offered a “concise, specific description” of his problem — ie., that prison officials stood idly by while he suffered an “assault ... by [other] inmates.” See DOC Directive 3375R-A. Absent a requirement that inmate grievances name defendants or specify particular legal theories of liability, complaints like plaintiffs fall outside the scope of this institution’s grievance procedure. Accord Espinal v. Goord, 558 F.3d 119, 121 (2d Cir.2009) (“The pro se prisoner cannot be expected to infer the existence of an identification requirement in the absence of a procedural rule stating that the grievance must include the names of the responsible parties. Where New York’s grievance procedures do not require prisoners to identify the individuals responsible for alleged misconduct, neither does the PLRA for exhaustion purposes.”) (citing Jones v. Bock, 549 U.S. 199, 218, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007)).
Assuming, arguendo, that failure-to-protect grievances will be accepted by Rikers Island officials — and City Defendants have presented no evidence to that effect — -plaintiffs failure to exhaust administrative remedies does not bar his Eighth Amendment claim. The PLRA’s exhaustion requirement does not apply where the incarcerated plaintiffs failure to exhaust available administrative remedies results from a “reasonable [though mistaken] interpretation of [Department of Corrections] regulations.” Hemphill, 380 F.3d at 689; see also Giano, 380 F.3d at 679 (same). Undergirding this rule is the venerable principle of lenity: that ambiguities in regulations limiting individuals’ constitutional and statutory rights should be resolved in favor those seeking to defend or vindicate those fundamental interests. See United States v. Bass, 404 U.S. 336, 347, 92 S.Ct. 515, 30 L.Ed.2d 488 (1971) (collecting cases discussing doctrine of lenity). Even if plaintiff erred in interpreting the scope of DOC Directive 3375R-A, his mistake was reasonable and his non-exhaustion does not provide a basis for dismissing the claims asserting lack of protec*244tion from physical attacks and excessive use of force by prison authorities.
VI. Conclusion
The motion of City Defendants to dismiss because of plaintiffs failure to exhaust administrative remedies is denied.
SO ORDERED. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224457/ | MEMORANDUM & ORDER
MARGO K. BRODIE, District Judge:
Plaintiff Anthony Bussie,1 a pretrial detainee at the Philadelphia Federal De-*245tention Center, filed this action, proceeding pro se, pursuant to 42 U.S.C. § 1983 against Senator John Boehner, Congressman Robert Andrews, Governor Chris Christie of New Jersey, United States Attorney Paul Fishman and an “unknown” Attorney General in New Jersey.2 For the reasons set forth below, Plaintiff’s request to proceed in forma pauperis is denied and he is ordered to pay the $400 filing fee within fourteen (14) days of this order in order to proceed with this action. Failure to do so will result in dismissal of this Complaint.
I. Background
Plaintiff is being held in federal custody on allegations that he threatened to harm a member of the United States Congress. See United States v. Bussie, No. 12-CR-229 (D.N.J.2012). Court records reflect that Plaintiffs trial has been continued indefinitely for reasons related to concerns over his psychiatric health. The Complaint in this action is on a form for filing civil rights complaints pursuant to 42 U.S.C. § 1983 and alleges various violations, including obstruction of justice, “intimidation,” “unconstitutional” fines, “unkind” license suspension and “unjust” child support payments. Plaintiff claims several injuries as a result of these alleged violations, including trauma and emotional illness and “minor head injuries.” Plaintiff seeks release from state prison in addition to monetary and other equitable relief.
II. Discussion
a. Standard of Review
A complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Although all allegations contained in the complaint are assumed to be true, this tenet is “inapplicable to legal conclusions.” Id. In reviewing a pro se complaint, the court must be mindful that the plaintiffs pleadings should be held to “less stringent standards than formal pleadings drafted by lawyers.” Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980) (internal quotation marks omitted); Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (same). Nevertheless, the court must screen “a complaint in a civil action in which a prisoner seeks redress from a governmental entity or officer or employee of a governmental entity” and, “dismiss the complaint or any portion of the complaint,” if it is frivolous, malicious, or fails *246to state a claim upon which relief may be granted. 28 U.S.C. § 1915A; see Abbas v. Dixon, 480 F.3d 636, 639 (2d Cir.2007). Similarly, the court is required to dismiss sua sponte an in forma pauperis action, if the court determines that it is (i) frivolous or malicious; (ii) fails to state a claim on which relief may be granted; or (iii) seeks monetary relief against a defendant who is immune from such relief.” 28 U.S.C. § 1915(e)(2)(B); Abbas, 480 F.3d at 639.
b. Prison Litigation Reform Act’s “Three Strikes Provision”
Prior to the filing of this action, Plaintiff accrued three strikes under the Prison Litigation Reform Act’s “Three Strikes Provision.” The Prison Litigation Reform Act provides that:
In no event shall a prisoner bring a civil action ... if the prisoner has, on 3 or more prior occasions, while incarcerated or detained in any facility, brought an action or appeal in a court of the United States that was dismissed on the grounds that it is frivolous, malicious, or fails to state a claim upon which relief may be granted, unless the prisoner is under imminent danger of serious physical injury.
28 U.S.C. § 1915(g). Although this is only Plaintiffs second case filed in the Eastern District of New York, he has filed over sixty actions in federal district courts across the United States and is under a filing injunction in the District of New Jersey, his pre-incarceration domicile. See U.S. Party/Case Index, https://pacer/uspci.uscourts.gov (last visited May 9, 2014); Conjured : Up Entertainment v. United States, No. 11-CV-2824 (D.N.J. July 26, 2011) (unpublished order). In at least three of his many civil actions, including his prior action in this Court, the actions were dismissed as frivolous pursuant to 28 U.S.C. § 1915A(b). See Bussie v. Dep’t of Defense, No. 13-CV-4574, 2013 WL 5348311, at *2 (E.D.N.Y. Sept. 23, 2013); Bussie v. Attorney General, No. 13-CV-476, 2013 WL 3934179, at *3 (W.D.Wis. July 30, 2013) (consolidated action). In addition, multiple district courts have dismissed Plaintiffs recent cases as barred by three strikes. See Bussie v. Boehner, No. 14-CV-161, 2014 U.S. Dist. LEXIS 27479, at *4-6 (D.Colo. Mar. 4, 2014); Bussie v. Boehner, No. 14-CV-279, 2014 U.S. Dist. LEXIS 26229, at *1 (N.D.Tex. Feb. 28, 2014); Bussie v. Boehner, No. 14-CV-345, 2014 U.S. Dist. LEXIS 25063, at *1, n. 2 (E.D.Mo. Feb. 27, 2014) (collecting prior strikes and dismissals under section 1915(g)); Bussie v. Boehner, No. 14-CV-77, 2014 WL 585377, at *2 (S.D.Ill. Feb. 14, 2014).
Because Plaintiff has accumulated at least three “strikes” for purposes of Section 1915(g), he may not proceed in forma pauperis in this case unless he is under imminent danger of serious physical injury. Plaintiff has failed to satisfy this requirement. For a “three-strikes” litigant to qualify for the imminent danger exception, the complaint “must reveal a nexus between the imminent danger it alleges and the claims it asserts.” Pettus v. Morgenthau, 554 F.3d 293, 298 (2d Cir.2009). Liberally construed, the Complaint presents no such claim. Plaintiffs Complaint is largely incomprehensible and contains no facts suggesting that Defendants took any action to harm him. Therefore, Plaintiff is barred from proceeding infor-ma pauperis under section 1915(g).
III. Conclusion
Plaintiffs request to proceed in forma pauperis is denied pursuant to the three-strikes provision of 28 U.S.C. § 1915(g). In order to proceed with this action, Plaintiff must pay the $400 filing fee within *247fourteen (14) days of this order.3 If Plaintiff fails to pay the filing fee within 14 days, the Complaint shall be dismissed. The Court certifies pursuant to 28 U.S.C. § 1915(a)(3) that any appeal would not be taken in good faith and therefore informa pauperis status is denied for the purpose of any appeal. See Coppedge v. United States, 369 U.S. 438, 444-45, 82 S.Ct. 917, 8 L.Ed.2d 21 (1962).
SO ORDERED.
. The Complaint’s caption also names "Taron Bussie” as a plaintiff in this action, however, as a non-attorney pro se litigant, Plaintiff lacks the ability to bring claims on behalf of *245another. See Guest v. Hansen, 603 F.3d 15, 20 (2d Cir.2010) ("A person who has not been admitted to the practice of law may not represent anybody other than himself.”); KLA v. Windham S.E. Supervisory Union, 348 Fed.Appx. 604, 605-06 (2d Cir.2009) ("Although litigants in federal court have a statutory right to act as their own counsel, 28 U.S.C. § 1654, the statute does not permit unlicensed laymen to represent anyone other than themselves.” (citation and internal quotation marks omitted)); Iannaccone v. Law, 142 F.3d 553, 558 (2d Cir.1998).
. On April 25, 2014, Plaintiff filed another action against various government employees pursuant to 42 U.S.C. § 1983. See Complaint, Bussie v. Government Accountability Office, No. 14-CV-2665 (E.D.N.Y.2014). By Memorandum and Order dated May 23, 2014, the Court denied Plaintiff's request to proceed in forma pauperis and ordered Plaintiff to pay the $400 filing fee in order to proceed with that action.
. Plaintiff is advised that even a fee-paid pro se complaint may be dismissed sua sponte if the Court lacks subject matter jurisdiction or if the complaint is frivolous. Fed.R.Civ.P. 12(h)(3); Fitzgerald v. First East Seventh St. Tenants Corp., 221 F.3d 362, 363 (2d Cir.2000) (holding that a district court may dismiss a frivolous complaint sua sponte notwithstanding the fact that the plaintiff paid the statutory filing fee). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224458/ | DECISION AND ORDER
SPATT, District Judge.
On December 2, 2013, the Plaintiff United States of America (the “United States”) brought this civil in rem action to forfeit and condemn to its use and benefit (1) four New York properties, namely (a) 249-20 Cambria Avenue, Little Neck, New York 11362, (b) 42-34 189th Street, Flushing, New York 11358, (c) 61-12 213th Street, Bayside, New York 11364, and (d) 37-32 10th Street, Long Island City, New York 11101 (the Defendant “New York Properties”); (2) two Florida Properties (a) 100 Live Oaks Blvd., Casselberry', Florida 32707 and (b) West Irlo Bronson Memorial Highway, Kissimmee, Florida 34747 (the “Defendant Florida Properties”), and (3) $70,068.00 and $30,760.00 in United States Currency (the “Defendant Funds”) (collectively the “Defendants In Rem”). According to the complaint, the Defendants In Rem are subject to forfeiture pursuant to: (a) 18 U.S.C. § 981(a)(1)(C), as property constituting or derived from proceeds traceable to violations of 18 U.S.C. § 545; and/or (b) 18 U.S.C. § 2323(a), as property used in any manner or part to commit or facilitate the commission of violations of 18 U.S.C. § 2320, and/or property constituting or derived from proceeds obtained directly or indirectly as a result of violations of 18 U.S.C. § 2320.
On March 26, 2014, claimants Chee Kuen Yim, Chee Kwan Yim, Chee Ching Yim, Yi Rong Liu, Rui Zhu Zheng, Qiao Chen, Regina Ngan, Swee Choo Ngan, and Shu Yu Lin (the “Claimants”) moved pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ.P.”) 12 to dismiss this in rem civil forfeiture action for lack of subject matter jurisdiction on the ground that there is a prior pending civil forfeiture proceeding against the Defendant New York Properties in Supreme Court, Suffolk County, captioned Spota v. Yim, No. 13-7703 (the “State Civil Action”), and pending orders of attachment against the New York Properties in that proceeding. For the reasons set forth, the motion is denied.
I. BACKGROUND
In deciding a Fed. R. Civ. P. 12(b)(1) motion, the court “may refer to evidence outside the pleadings.” Id. Notably, “[t]he standard for reviewing a [Fed.R.Civ.P.12(b)(1) ] motion to dismiss is essentially identical to the [Fed.R.Civ.P.] 12(b)(6) standard,” “except that ‘[a] plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.’ ” Taylor v. New York State Office for People with Developmental Disabilities, 13-cv-740 (NAM/CFH), 2014 WL 1202587, slip op. at *3 (N.D.N.Y. Mar. 14, 2014) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000)).
A. The State Actions
In or about December 2010, the Suffolk County District Attorney’s Office, Asset Forfeiture Unit (the “SCDA”) initiated an investigation involving the importation, transportation, distribution, and sale of trademark counterfeit goods in the New York Metropolitan area and elsewhere.
The SCDA identified, among others, Chee Kuen Yim (“Janice Yim”), Chee Kwan Yim (“Jimmy Yim”), Chee Ching Yim (“Steve Yim”), and Regina Ngan (“Tina Ngan”) of Queens, New York, as well as Anthony Moresco (“Moreseo”) of Rutherford, New Jersey as main targets *250(collectively the “Targets”). These persons allegedly participated in a scheme to knowingly import and sell counterfeit designer handbags, boots, jackets, pocketbooks, sunglasses, jewelry, and other merchandise (the “Trademark Counterfeit Scheme”). The Targets allegedly conspired to import this counterfeit merchandise from China, store it at facilities in Queens, New York, and then distribute it to “street sellers” throughout the New York metropolitan area, Florida, Pennsylvania, Illinois, Georgia, and California.
Beginning on or about March 15, 2013, the Targets were arraigned in New York State Court in connection with the Trademark Counterfeit Scheme, see The People of the State of New York v. Goodies Enterprise, et al., CR-13-0670, 13-1675 (the “State Criminal Action”). Indictments were returned against the Targets, among others.
On or about May 8, 2013, New York State commenced the State Civil Action pursuant to Article 13-A of the New York Civil Practice Law and Rules (“CPLR”). The named defendants in the State Civil Action are, among others, Jimmy Yim, Janice Yim, Steve Yim,. Tina Ngan, Mores-co, Swee Choo Ngan, Zhou Yu Lin, Quiao Chen (the “State Civil Defendants”). In the State Civil Action, New York State seeks a judgment in the amount of $6,721,667.00 against the State Civil Defendants, jointly and severally, as the proceeds of the criminal activity.
1.The Defendant New York Properties
On March 13 and 14, 2013, in the State Civil Action, New York State obtained two ex parte orders of attachments pursuant to CPLR § 1317 (the “Attachment Orders”) which, among other things, restrained “all property of, or debts owing to the [State Civil Defendants [therein for the sum of $6,721,667.00, as the proceeds, substituted proceeds and/or instrumentalities of defendants’ criminal conduct.” Included in the properties which could be levied under the order of attachment were the Defendant New York Properties. In other words, the attachment orders prohibited the State Civil Defendants from further encumbering the Defendant New York Properties.
Pursuant to Section 1322 of the CPLR, agents from the SCDA’s Office levied upon the Defendant New York Properties by filing a notice of attachment with the local county clerk. At that time, also pursuant to CPLR Section 1322, the county clerk recorded and indexed the notice of attachment in the same manner and with the same effect as a notice of the pendency of an action.
The Claimants opposed the SCDA’s motion to confirm the ex parte attachments. On February 11, 2014, Supreme Court, Suffolk County, confirmed the attachments. A motion for reconsideration of that order is currently pending before the Supreme Court.
2. The Defendant Florida Properties
New York State has not taken any action hgainst the Florida Properties in connection with the State Civil Action. Specifically, no filing has been made in an attempt to encumber or levy any real property in Florida, nor is there a final order in the State Civil Action that can be filed in Florida.
3. The Defendant Funds
On March 14, 2013, law enforcement executed a search warrant at the Cambria Avenue property and seized approximately seventy thousand sixty-eight dollars and zero cents ($70,068.00) in United States currency believed to be proceeds of the illegal trademark counterfeit scheme. Law enforcement also executed a separate *251search warrant at the Chase Bank in Flushing, New York on Swee Choo Ngan’s safe deposit box and seized approximately thirty thousand seven hundred and sixty dollars and zero cents ($30,760.00) in United States currency believed to be proceeds of the illegal trademark counterfeit scheme.
On April 24, 2013, this approximate $101,000.00 in seized cash was turned over to the United States Department of Homeland Security, and subjected to federal forfeiture, pursuant to a Turnover Order entered by the Supreme Court, Suffolk County. In each Turnover Order, New York State confirmed that “there is no state civil forfeiture action in rem pending against [the Defendant Funds], nor does the District Attorney intend to commence such an action against such property.”
B. The Present Action
As noted above, on December 2, 2013, the United States commenced this civil in rem action seeking the forfeiture of the Defendants In Rem for the United States’ use and benefit. Thereafter, the Claimants separately filed claims pursuant to Rule G of the Supplemental Rules for Certain Admiralty and Maritime Claims.
On March 26, 2014, the Claimants filed this motion to dismiss the complaint for lack of subject matter jurisdiction. Relying on Penn Gen. Cas. Co. v. Commonwealth of Pennsylvania ex rel. Schnader, 294 U.S. 189, 195, 55 S.Ct. 386, 389, 79 L.Ed. 850 (1935), the Claimants argue that the commencement of the State Civil Action pursuant to Article 13-A of the CPLR constitutes a sufficient exercise of in rem jurisdiction over the properties sought to be forfeited so as to bar a subsequent federal in rem civil forfeiture proceeding against the same property. Alternatively, the Claimants argue that by issuing the Attachment Orders, the Supreme Court, Suffolk County secured in rem jurisdiction over the properties sought to be forfeited here. The United States opposes the Claimants’ motion to dismiss.
II. DISCUSSION
“A common-law rule of long standing prohibits a court, whether state or federal, from assuming in rem jurisdiction over a res that is already under the in rem jurisdiction of another court.’ ” Chesley v. Union Carbide Corp., 927 F.2d 60, 66 (2d Cir.1991), quoting United States v. One 1985 Cadillac Seville, 866 F.2d 1142, 1145 (9th Cir.1989) (collecting cases). This common law rule was developed to maintain comity between courts. As the Ninth Circuit observed in One 1985 Cadillac Seville, “such harmony is especially compromised by state and federal judicial systems attempting to assert concurrent control over the res upon which jurisdiction of each depends.” 866 F.2d at 1145
“The rule against concurrent in rem proceedings is a prudential limitation on the exercise of federal jurisdiction, rather than a constitutional limitation upon jurisdiction.” York Hunter Const., Inc. v. Avalon Properties, Inc., 104 F.Supp.2d 211, 214 (S.D.N.Y.2000). However, as the Ninth Circuit has noted, “This does not mean, however, that the matter is within the discretion of the district court. The language of Penn General indicates that a federal court must yield to a prior state proceeding.” 866 F.2d at 1145. Or, as the United States Supreme Court originally put the matter, “[t]he jurisdiction of one court must of necessity yield to the other.” Penn General, 294 U.S. at 195, 55 S.Ct. at 389. Thus, “[a]s a matter of comity and practicality, the court that first acquires jurisdiction over the res is the court that acts.” York Hunter, 104 F.Supp.2d at 214.
*252In Penn General, it was impossible for both courts simultaneously to assert jurisdiction over the same res because the successful exercise of jurisdiction by each required the exclusion of the other. Indeed, in that case:
The res was an insolvent insurance company and the purpose of each of the two purported exercises of jurisdiction was to assert exclusive control over the management of the company’s assets. The gist of the two competing orders was to oust the other from control of the res so that the court’s receiver could exercise total control over the salvage efforts. The Supreme Court’s opinion recognized the fundamental incompatibility of dual exercise of jurisdiction and ruled that the first exercise would be exclusive.
United States v. $3,000,000 Obligation of Qatar Nat. Bank to Nomikos, 810 F.Supp. 116, 118 (S.D.N.Y.1993).
The “corollary” of the rule preventing simultaneous in rem actions is that where one action is in personam and one in rem, both cases may proceed simultaneously. United States v. One 1986 Chevrolet Van, 927 F.2d 39, 44 (1st Cir.1991). Indeed, “the jurisdictional boundaries between federal and state courts in the forfeiture context turn on whether and when a particular court exercised in rem or in personam jurisdiction.” City of Concord v. Robinson, 914 F.Supp.2d 696, 709 (M.D.N.C.2012). This distinction makes sense because “the effect of filing [an] in rem action in federal court ‘is to draw to the federal court the possession or control, actual or potential, of the res,’ and a state court’s exercise of jurisdiction ‘necessarily impairs, and may defeat,’ the federal court’s jurisdiction. In contrast, an in per-sonam action involves a controversy over liability rather than over possession of a thing.” Ret. Sys. of Ala. v. J.P. Morgan Chase & Co., 386 F.3d 419, 426 (2d Cir.2004)(internal citation omitted).
This case presents a question of first impression — namely, whether a New York State civil action commenced pursuant to Article 13-A of the CPLR amounts to a jurisdictional bar to a later-commenced civil in rem action in federal court. The answer turns on whether the State Civil Action commenced under Article 13-A of the CPLR is in personam, in rem, or quasi in rem.
In interpreting statutory provisions such as Article 13-A, a court should attempt to effectuate the intent of the Legislature. See Matter of New York County Lawyers’ Assn. v. Bloomberg, 19 N.Y.3d 712, 721, 955 N.Y.S.2d 835, 979 N.E.2d 1162 (2012); Patrolmen’s Benevolent Assn. of City of N.Y. v. City of New York, 41 N.Y.2d 205, 208, 391 N.Y.S.2d 544, 359 N.E.2d 1338 (1976). To that end, the court must first look to the statutory text. See Matter of New York County Lawyers’ Assn., 19 N.Y.3d at 721, 955 N.Y.S.2d 835, 979 N.E.2d 1162; Majewski v. Broadalbin-Perth Cent. School Dish, 91 N.Y.2d 577, 583, 673 N.Y.S.2d 966, 696 N.E.2d 978 (1998). Where the language of a statute is clear and unambiguous, the court must give effect to its plain meaning. See Kramer v. Phoenix Life Ins. Co., 15 N.Y.3d 539, 550, 914 N.Y.S.2d 709, 940 N.E.2d 535 (2010); Matter of Crucible Materials Corp. v. New York Power Auth., 13 N.Y.3d 223, 229, 889 N.Y.S.2d 517, 918 N.E.2d 107 (2009). Moreover, a statute must be construed as a whole, with all parts read and construed together. See New York State Psychiatric Assn., Inc. v. New York State Dept. of Health, 19 N.Y.3d 17, 23-24, 945 N.Y.S.2d 191, 968 N.E.2d 428 (2012).
In this case, the State Civil Action was brought pursuant to Article 13-A of the CPLR, which provides, in pertinent part, *253that “[a]ny action under [Article 13-A] ... shall be civil, remedial, and in personam in nature ...” In enacting this provision, “[t]he New York State Legislature was unequivocal in its designation of the CPLR Article 13-A Civil Forfeiture Act as being In Personam in nature.” Dist. Attorney of Queens Cnty. v. McAuliffe, 129 Misc.2d 416, 424, 493 N.Y.S.2d 406, 412 (Sup.Ct.1985). Indeed, nothing contained in the complaint in the State Civil Action asks the state court to exercise jurisdiction in rem over the Defendant New York Properties. Therefore, this federal civil in rem action may proceed simultaneously with the prior-filed in personam State Civil Action.
The Claimants ask this Court to examine the statute’s legislative history to conclude that the State Civil Action is, in fact, an in rem or quasi in rem proceeding. To be sure, there is extratextual support for the proposition that, in enacting Article 13-A, some New York State assemblyman contemplated a quasi in rem proceeding. See e.g., Letter from Ass’t Att’y Gen. Allee to New York Attorney General’s Office, dated June 24, 1983, at 1 (the bill “appears to be a hybrid in rem/in personam” forfeiture statute), reprinted in S. Kessler, New York Criminal and Civil Forfeitures, § App 4.01, at App 4-5 (LexisNexis 2013); Letter from Dist. Att’y Robert M. Morgenthau to Sen. Padavan, dated July 12, 1983, at 2 (noting that “the unique in per-sonam aspects of this bill were intended to provide law enforcement authorities substantial flexibility in located assets which could be subject to forfeiture” but asserting that the in rem/in personam “hybrid” elements of the bill could pose enforcement risks), reprinted in S. Kessler, New York Civil and Criminal Forfeitures, § App 4.01, at App 4-10; Memorandum from Anthony J. Girese to Members of the Legislative Committee, dated July 6, 1983, at 1 (noting the “curiously hybrid in rem/in personam structure” of the statute), reprinted in S. Kessler, New York Civil and Criminal.
However, where, as here, the explicit language of the text is clear and unambiguous, the court must give effect to its plain meaning. See Matter of Estate of Devine, 126 A.D.2d 491, 493, 511 N.Y.S.2d 231 (1st Dep’t 1987)(“Where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used”) (citation omitted). It is not for the courts to “correct supposed errors, omissions or defects in legislation.” Meltzer v. Koenigsberg, 302 N.Y. 523, 525, 99 N.E.2d 679 (1951).
Here, as noted above, Article 13-A by its terms makes clear that it is an in personam, rather than in rem, statute. By contrast, there exists in New York State both civil and criminal in rem forfeiture statutes. See e.g. N.Y. Pub. Health Law § 3388 (McKinney 2014); N.Y. Penal Law § 480.05 (McKinney 2014); N.Y. Penal Law. § 410.00 (McKinney 2014); N.Y. Penal Law § 415.00.
The fact that the Supreme Court, Suffolk County issued the Attachment Orders, which encompassed the New York Properties, does not thereby convert the State Civil Action into an in rem action. An order of attachment under CPLR § 1317 is merely a provisional remedy used to enforce monetary judgments under Article 13-A. In particular, the Attachment Orders only prohibit the State Civil Defendants from further encumbering the New York Properties so as to protect' the State’s interest in their equity, which may be used to potentially satisfy a judgment in the State Civil Action.
In this regard, the concerns about comity expressed by the Supreme Court of the United States in Penn General and its progeny are not present here. Stated otherwise, the steps taken by New York State in the State Civil Action do not conflict with any potential order of forfeiture by *254this Court. If the Defendant New York Properties are forfeited to the United States, the United States would take ownership and possession of the properties, subject to any mortgages, liens, or encumbrances thereon. If New York State is subsequently granted a judgment against the State Civil Defendants, and chooses to satisfy all or part of that judgment with equity contained in the Defendant New York properties, it would do so against the United States, who would pay the state as a judgment creditor, along with other judgment creditors/mortgage holders.
In the Court’s view, “[pjroceeding in this fashion would entail no interference with the state court’s exercise of its jurisdiction, and no discourtesy to the state court, nor insensitivity to considerations of comity.” $8,000,000 Obligation of Qatar Nat. Bank to Nomikos, 810 F.Supp. at 118-19.
The Claimants also contend that this proceeding is invalid because the Supreme Court, Suffolk County has not issued a turnover order and the United States has failed to comply with the notice provisions of the federal forfeiture laws. The Court finds this, argument unavailing because the Claimants ignore the applicable section of that statute, which states that where “the property is seized by a State or local law enforcement agency and turned over to a Federal law enforcement agency for the purpose of forfeiture under Federal law, notice shall be sent not more than 90 days after the date of seizure by the State or local law enforcement agency.” 18 U.S.C. § 983(a)(1)(A)(iv).
However, here, no real property was ever “seized” by New York State. The real property at issue remains in the possession of the current owner, the applicable State Civil Defendants, who, in fact, continue to occupy and/or rent and collect income therefrom.
Having determined that the Supreme Court, Suffolk County has not exercised in rem jurisdiction over the Defendant New York Properties in the State Civil Action, the Court turns to the Defendant Florida Properties which, the Court finds, remain subject to federal forfeiture. While New York State filed a notice of attachment regarding the Defendant New York Properties, it has taken no action against any Florida property in connection with the State Civil Action. Specifically, no filing has been made in an attempt to encumber or levy any real property in Florida, nor is there is a final order in the State Civil Action that can be filed in Florida. Put another way, there has been no exercise of New York State jurisdiction over the Defendant Florida Property and, therefore, they are subject to federal forfeiture.
Similarly, the Claimants offer no credible legal justification for this Court to decline to exercise jurisdiction over the Defendant Funds.
In sum, the Court denies the Claimants’ motion to dismiss for lack of subject matter jurisdiction.
SO ORDERED. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218968/ | DAWKINS, District Judge.
This is a suit for a refund of money paid under protest as income taxes. The question of whether or not it was due arises from the basis adopted for depreciation by plaintiff on its compress property. It sought to take advantage of appraisements made at the time it purchased the property from two other companies, to wit, the Shreveport Compress Company and the Louisiana Compress Company. The plaintiff was organized as a new corporation, and the two companies sold their compress properties to it for stock in the new concern, which included all of the capital stock so issued. I do not think it necessary to go into the question of what happened thereafter with this stock. It appears to me to be sufficient to say that, in my opinion, this resulted in a reorganization under the law, which required the new company to use, as a basis for depreciation, the same values as had previously been allowed to the old companies. It is conceded that, if what was done amounted in law under the applicable revenue statutes to a reorganization, then the plaintiff is not entitled to recover. Having reached the conclusion that it did, it follows that the demaud should be rejected.
The motion for new trial will, therefore, be overruled. Proper decree should be presented. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218970/ | UNDERWOOD, District Judge.
The above-entitled proceeding coming on for a hearing and having been heard, the court finds as follows:
While serving a sentence at a penal institution of the United States, petitioner escaped. He was later apprehended and convicted for violation of the Escape Act (18 USCA § 753h), which provides that such sentence shall “begin upon the expiration of or upon legal release from the sentence for which said person was originally confined.”
The trial court imposed a sentence of a year and one day in the penitentiary on the escape charge and ordered that it begin to run from the termination of the sentence he was serving at the time of escape.
Petitioner maintains that the two sentenees must run concurrently from the date of the last, on account of the terms of the Act of June 29, 1932, § 1 (18 USCA § 709a) which provides that “the sentence of imprisonment of any person convicted of a crime in a court of the United States shall commence to run from the date on which such person is received at the penitentiary, reformatory, or jail for service of said sentence: Provided, That if any such person shall be committed to a jail or other place of detention to await transportation to the place at which his sentence is to be served, the sentence of such person shall commence to run from the date on which he is received at such jail or other place of detention.” Prior to the enactment of the latter statute, unquestionably the escape sentence had to be served after the termination of the original sentence. There is nothing to indicate that Congress intended to repeal or amend the escape statute to make sentences run concurrently unless the general provision of the act repealing “all laws and parts of laws in conflict herewith” had that effect. I do not think it did.
A reasonable construction of the act justifies the interpretation that the provision relating to the receipt of the prisoner at the penitentiary “for service of said sentence” or commitment to “a jail or other place of detention to await transportation to the place at which his sentence is to be served” means receipt at the penitentiary for service of that particular sentence, that is, the escape sentence, or commitment to jail to await transportation to the place where it is to be served, neither of which events occurs until after the termination of the first sentence. Until that time, the prisoner is held, not for service of the escape sentence or to await transportation to the penitentiary to serve same, but is received back at the penitentiary for completion of the old sentence or at the jail for transportation to the penitentiary to serve it, and he will be received at the penitentiary for service of the escape sentence only after he has served the original sentence.
This construction is a reasonable one and allows full force and effect to both statutes.
Whereupon it is considered, ordered, and adjudged that said writ of habeas corpus be and the same is hereby discharged, and it is further ordered that petitioner be remanded to the custody of respondent. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218971/ | KNIGHT, District Judge.
This is a motion to restrain the industrial commissioner of the state of New York from proceeding to collect wages of the above-named bankrupt upon a garnishee execution issued upon a judgment in favor of said industrial commissioner and against said bankrupt. The bankrupt contends this judgment is dischargeable in bankruptcy. The award of compensation was made for personal injuries sustained by bankrupt’s employee.
The award was not a claim discharge-able in bankruptcy. Lane v. Industrial Commissioner of State of New York (C. C. A.) 54 F.(2d) 338, 342. Does the entry of a judgment upon the award create a debt which is dischargeable 9 Section 63 of the Bankruptcy Act (11 USCA § 103) provides that debts may be proved which are “(1) a fixed liability, as evidenced by a judgment.” If this judgment is provable, it is dischargeable in bankruptcy. Section 17, Bankruptcy Act (11 USCA § 35).
In the Lane Case attention is called to the fact that no judgment had been entered upon the awards. It is also said: “An award is not equivalent to a judgment. Section 26 of the Compensation Act provides when a judgment may be entered on the award. Such awards are subject to revision by the commissioner.” I do not think the court intended to indicate that judgment upon an award would be dischargeable. This thought is confirmed by the further statement of the court that, “if a claim for alimony is not provable when it is in judgment, on the same principle of obligation imposed, a compensation award made prior to the bankruptcy petition is not provable.” The decisions of the courts are to the effect'that liability for compensation is not based “upon a contract expressed or implied,” but, as said in Cudahy Packing Co. of Neb. v. Parramore, 263 U. S. 418, 44 S. Ct. 153, 154, 68 L. Ed. 366, 30 A. L. R. 532, “upon the existence of the relationship which the employee bears to the employment because of and in the course of which he has been injured.”
The Workmen’s Compensation Law of New York (Consol. Laws, c. 67), § 26, provides for the entry of the judgment upon the filing of copy of the decision of the State Industrial Board awarding compensation. It also provides that the court may vacate or modify the judgment to conform to any later award or decision, and that it may be compromised by the board in such manner as may best serve the interests of the person entitled to the award. The same reasoning which applies to the award should apply to the judgment upon such award. The basis for the obligation is the same. A literal interpretation of section 63a, subd. 1, Bankr. Act, 11 USCA § 103 (a) (1), would apply that provision to every money judgment. This judgment is fixed in the sense that it is definite and creates a lien. However, in view of the provisions of section 26 of the New York Workmen’s Compensation Act and the interpretation of the courts as regards the nature of a liability for compensation, I do not think that this judgment evidences a debt which is a fixed liability within the intent of section 63. The judgment upon the award is therefore not dischargeable.
Motion denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218972/ | SLICK, District Judge.
The facts in this ease are all stipulated, and the stipulation of facts is incorporated verbatim in the special findings of fact. The facts are voluminous, and.it is not necessary to recite in this memorandum of opinion all of the facts.
Briefly, the facts are that Commercial Trust Company of Gary drew its check on the Gary State Bank payable to the plaintiff herein in the sum of $2,196.89. This check came to the plaintiff, and was deposited with Securities Trust Company of Indianapolis for collection. The Securities Trust Company in turn deposited the cheek with the Fletcher American National Bank of Indianapolis for collection. The Fletcher American National Bank sent the check to the National Bank of America of Gary for collection. The check was received by the National Bank of America at Gary on Dec. 31, 1931.
It was at this time, and had been for a long time, the practice and custom of the National Bank of America, when it received collections from Fletcher American National Bank, to make such collections through the clearing house at Gary and to remit by draft on Chicago. This custom was well known by Fletcher American National Bank, and was followed in this ease, the check being presented on December 31, 1931, to the Gary State Bank through said clearing house at Gary.
The National Bank of America closed its doors January 2, 1932. A draft of which the check in question was a part was issued by the National Bank of America to Fletcher American National Bank, but failed to clear before the National Bank of America closed its doors. Defendant Jennings, receiver of National Bank of America, took possession of all the assets of the National Bank of America, and took possession of the $2,196.89 in question.
The question to determine in this ease is whether plaintiff be allowed a preferred claim in the full amount of $2,196.89, or whether it receive on its claim only ratable dividends paid to general creditors. The serious question for decision is whether a collection made by a national bank operating in the state of Indiana where the statute provided that the collecting bank act as agent or subagent for the purpose of collection shall be paid in full. In other words, does the Indiana Uniform Bank Collection Code govern here, or is it a nullity so far as national banks operating in Indiana are concerned ?
The federal statutes and decisions in reference to distribution of assets of insolvent national banks control and provide for ratable dividends by the Comptroller of money of a bank turned over to him by the receiver of such national bank. In other words, the receiver reduces the assets to cash and turns this cash, together with all other cash belonging to the bank, over to the Comptroller, who in turn ratably divides it amongst all claimants.
The question then resolves itself to the inquiry as to whether the money in the hands of the receiver collected under the Indiana Uniform Bank Collection Code (Acts 1929, c. 164) was the money of the bank, and so constituted assets, or was the money held in, or impressed with, a trust, and hence not assets of the bank, which the receiver in charge could legally turn over to the Comptroller for ratable distribution under the federal statute.
There is no doubt that the National Banking Act (see 12 USCA § 21 et seq.) and decisions of the federal courts control in the distribution of the assets of an insolvent national bank. They, the assets, must be ratably distributed to all the creditors, but did the *570money in controversy constitute assets of the bank? Did the money so collected belong to the bank? Did the bank get title to the money, or was it the money of plaintiff held in trust by the insolvent bank?
Defendant argues that to adopt the theory that the statute of Indiana is controlling on the question of agency is equivalent to holding that each state in the union may adopt rules for distribution of assets of insolvent national banks. The results are not so far-reaching.
The federal rule is that a receiver of an insolvent national bank shall turn over for distribution the assets of the failed bank, not the assets, cash, or property of some other person held by such insolvent bank as agent or in trust. The federal rule does not require that money in the possession of an insolvent national bank as agent shall be considered assets.
The Indiana state rule is that money collected as this money was shall be held by the collecting bank as agent. There appears to be no conflict between the federal statute providing for ratable distribution of assets and the decisions of the federal courts under that statute and the Uniform Bank Collection Code of Indiana. National banks are amenable to the laws of the state in which they operate. They are governed in all respects by the state law, except where the state law contravenes the federal law, in which case the federal law is controlling. See McClellan v. Chipman, 164 U. S. 347, 17 S. Ct. 85, 87, 41 L. Ed. 461, where the Supreme Court of the United States lays down the rule in the following language: “The rule being the operation of general state laws upon the dealings and contracts of national banks; the exception being the cessation of the operation of such laws whenever they expressly conflict with the laws of the United States, or frustrate the purpose for which the national banks were created, or impair their efficiency to discharge the duties imposed upon them by the law of the United States.”
The court in this opinion used the following language: “The purpose and object of congress in enacting the national bank law was to leave such banks, as to their contracts in general, under the operation of the state law, and thereby invest them as federal agencies with local strength, while at the same time preserving them from undue state interference wherever congress, within the limits of its constitutional authority, has expressly so directed, or wherever such state interference frustrates the lawful purpose of congress, or impairs the efficiency of the banks to discharge the duties imposed upon them by the law of the United States.”
The state law of Indiana provides explicitly that the funds in question shall be held as agent or subagent. The federal law contains no contrary provision. To sustain plaintiff’s contention is to give effect to the Indiana Code as well as to the federal acts. To sustain defendant’s contention would be to destroy the effect of the Indiana Code as applied to national banks. The constitutionality of the Indiana Uniform Bank Collection Code is not challenged. It is and was in full force and effect at the time of this transaction.
Section 2, chapter 164, of the Indiana Acts of 1929, page 515, provides that, “where an item is deposited or received for collection, the bank of deposit shall be agent of the depositor for its collection and each subsequent collecting bank shall be subagent of the depositor.”
Section 1 of the same act at page 514 provides that: “The term ‘bank’ shall include any person, firm or corporation engaged in the business of receiving and paying deposits of money within this state.”
No authority has been cited, and I think none can be, that directs or permits the appropriation by a receiver of funds held in trust or as agent for another person. These funds must be paid over by the receiver to the owner thereof. They do not constitute assets of the failed bank, do not belong to the bank, and the receiver has no right to hold them or pay them over to the Comptroller for distribution, or to do anything with them except to turn them over to the rightful owner, the plaintiff in this ease. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218973/ | HOLMES, District Judge.
The opinion of the court in this ease was filed February 20, 1933. Southwestern Bell Telephone Company v. City of San Antonio et al. (D. C.) 2 F. Supp. 611. In pursuance thereof, March 20, 1933, a final decree was entered sustaining defendants’ exceptions to the master’s report, setting aside said report, and dismissing the bill. Findings-of fact and conclusions of law were incorporated in the decree. A petition to set aside the decree and have a rehearing on the merits was filed by the plaintiff without delay, and application made to the court to consider the same upon briefs and oral argument. Briefs having been filed within the time agreed upon by counsel, the ease was reargued orally May 25, 1933, upon the same record originally considered by the court and master. Renewing its former contentions, it was urged in the argument and briefs for the plaintiff that the court had misconceived the findings o.f the master, and erred in setting aside his report.' The earnestness of this plea, the ability of counsel] and the reputation of the master were sufficient to enlist the attention of the court, but, in addition, the mass of oral and documentary testimony, with its intricate accounting and maze of figures, was ample admonition of the possibility of error. For these reasons I have carefully re-examined the record and briefs.
Subsequent to the filing of my opinion in this case, a decision of the Supreme Court was handed down on May 8, 1933, in the case of Los Angeles Gas & Electric Corporation v. Railroad Commission of the State of California, 289 U. S. 287, 53 S. Ct. 637, 643, 77 L. Ed. 1180, in which it restated with particularity the general principles which should control the courts in confiscatory rate controversies. Its own prior decisions were freely cited to sustain the pronouncements therein made by the court. That they are entirely harmonious with the guiding principles of the court in this ease will appear from the following quotation from the opinion of the Chief Justice:
“We have emphasized the distinctive function of the court. We do not sit as a board of revision, but to enforce constitutional rights. San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 446, 23 S. Ct. 571, 47 L. Ed. 892. The legislative discretion implied in the rate-making power necessarily extends to the entire legislative process, embracing the method used in reaching the legislative determination as well as that determination itself. We are not concerned with either, so long as constitutional limitations are not transgressed. When the legislative method is disclosed, it may have a definite bearing upon the validity of the result reached, but the judicial function does not go beyond the decision of the constitutional question. That question is whether the rates as fixed are confiscatory. And upon that question the complainant has the burden of proof, and the court may not interfere with the exercise of the state’s authority unless confiscation is clearly established.
“As the property remains in the ownership of the complainant, the question is whether the complainant has been deprived of a fair return for the service rendered to the public in the use of the property. This court has repeatedly held that the basis of calculation is the fair value of the property; that is, that what the complainant is entitled to demand, in order that it may have ‘just compensation’ is ‘a fair return upon the reasonable value of the property at the time it is *572being used for the public.’ In determining that basis, the criteria at hand for ascertaining market value, or what is called exchange value, are not commonly available. The property is not ordinarily the subject of barter and sale and, when rates themselves are in dispute, earnings produced by rates do not afford a standard for decision. The value of the property, or rate base, must be determined under these inescapable limitations. And mindful of its distinctive function in the enforcement of constitutional rights, the court has refused to be bound by any artificial rule or formula which changed conditions might upset. We have said that the judicial ascertainment of value for the purpose of deciding whether rates are confiscatory ‘is not a matter of formulas, but there must be a reasonable judgment, having its basis in a proper consideration of all relevant facts.’ Minnesota Rate Cases, 230 U. S. 352, 434, 33 S. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18; Georgia Railway & Power Co. v. Railroad Commission, 262 U. S. 625, 630, 43 S. Ct. 680, 67 L. Ed. 1144; Bluefield Water Works Co. v. Public Service Commission, 262 U. S. 679, 690, 43 S. Ct. 675, 67 L. Ed. 1176.
“The actual cost of the property — the investment the owners have made — is a relevant fact. Smyth v. Ames, 169 U. S. 466, 547, 18 S. Ct. 418, 42 L. Ed. 819. But, while cost must be considered, the Court has held that it is not an exclusive or final test. The public have not underwritten the investment. The property, on- any admissible standard of present value, may be worth more or less than it actually cost. The time and circumstances of the outlay, and the effect of altered conditions, demand consideration. Even when cost is revised so as to reflect what may be deemed! to have been invested prudently and in good faith, the investment may embrace property no longer used and useful for the public. This is strikingly illustrated in the present ease where the company has a large gas manufacturing plant which, in view of the supply of natural gas, has not been used for several years and is not likely to be used for many years to come, if at all. But no one would question that the reasonable cost of an efficient public utility system ‘is good evidence of its value at the time of construction.’ We have said that ‘such actual cost will continue fairly well to measure the amount to be attributed to the physical elements of the property so long as there is no change in the level of applicable prices.’ McCardle v. Indianapolis Water Co., 272 U. S. 400, 411, 47 S. Ct. 144, 148, 71 L. Ed. 316. And, when such a change in the price level has occurred, actual experience in the construction and development of the property, especially experience in a recent period, may be an important check upon extravagant estimates.
“This court has further declared that, in order to determine present value, the cost of reproducing the property is a relevant fact which should have appropriate consideration. Southwestern Bell Telephone Co. v. Public Service Commission, 262 U. S. 276, 287, 288, 43 S. Ct. 544, 546, 67 L. Ed. 981, 31 A. L. R. 807; Bluefield Water Works v. Public Service Commission, supra; Standard Oil Co. v. Southern Pacific Co., 268 U. S. 146, 156, 45 S. Ct. 465, 69 L. Ed. 890; McCardle v. Indianapolis Water Co., supra, 272 U. S. 410, 47 S. Ct. 144, 71, L. Ed. 316. In Southwestern Bell Telephone Co. v. Public Service Commission, supra, this court said that ‘it is impossible to ascertain what will amount to a fair return upon properties devoted to public service, without giving consideration to the cost of labor, supplies, etc., at the time the investigation is made. An honest and intelligent forecast of probable future values, made upon a view of all the relevant circumstances, is essential. If the highly important element of present costs is wholly disregarded, such a forecast becomes impossible.’ See St. Louis & O’Fallon Ry. Co. v. United States, 279 U. S. 461, 485, 49 S. Ct. 384, 73 L. Ed. 798. But, again, the court has not decided that the cost of reproduction furnishes an exclusive test. See Smyth v. Ames, supra; Minnesota Rate Cases, supra; Georgia Railway & Power Co. v. Railroad Commission, supra. We have emphasized the danger in resting conclusions upon estimates of a conjectural character. We said, in Minnesota Rate Cases, supra, 230 U. S. 452, 33 S. Ct. 729, 761, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18: ‘The eost-ofreproduction method is of service in ascertaining the present value of the plant, when it is reasonably applied and when the cost of reproducing the property may be ascertained with a proper degree of certainty. But it does not justify the acceptance of results which depend upon mere conjecture. It it fundamental that the judicial power to declare legislative action invalid upon constitutional grounds is to be exercised only in clear eases. The constitutional invalidity must bo manifest, and if it rests upon disputed questions of fact, the invalidating facts must be proved. And this is true of asserted value as of other facts.’ The weight to be given to actual cost, to historical cost, and to cost of reproduction new, is to be determined in the *573light of the facts of the particular ease. McCardle v. Indianapolis Water Co., supra.”
Counsel insist that the court laid too heavy a burden upon the plaintiff at the outset of the case by prescribing that the proof of confiscation must be beyond all reasonable doubt. Pertinent authorities of our own and other circuits, as well as of the Supreme Court, are not wanting to sustain the proposition. Also, it is a well-settled general rule of constitutional law that, if there is a reasonable doubt of its validity, legislation may not be declared void by the courts. However, other decisions say, “The rates must be plainly unreasonable * * * and * * * the ease must be a clear one before the courts ought to be asked to interfere with state legislation upon the subject.” Willcox v. Consolidated Gas Co., 212 U. S. 19, 29 S. Ct. 192, 195, 53 L. Ed. 382, 395, 400, 48 L. R. A. (N. S.) 1134, 15 Ann. Cas. 1034. Again, it is said, the rates must be “plainly and palpably unreasonable.” San Diego Land & Town Co. v. National City, 174 U. S. 739, 19 S. Ct. 804, 43 L. Ed. 1154. In another case the court said: “In seeking to override the action of the state upon constitutional grounds it was incumbent upon them to establish the invalidating facts by definite and convincing proof.” Allen v. St. Louis, I. M. & S. Railroad Company, 230 U. S. 557, 560, 33 S. Ct. 1030, 1033, 57 L. Ed. 1625. At another time it is said the proof must be “manifest.”
Probably the latest utterance of the Supreme Court on the subject is contained in the above quotation from Los Angeles Gas & Electric Corporation v. Railroad Commission of California, 289 U. S. 287, 53 S. Ct. 637, 643, 77 L. Ed. 1180. It is as follows: “When the legislative method is disclosed, it may have a definite bearing upon the validity of the result reached, but the judicial function does not go beyond the decision of the constitutional question. That question is whether the rates as fixed are confiscatory. And upon that question the complainant has the burden of proof, and the Court may not interfere with the exercise of the state’s authority unless confiscation is clearly established.”
Subsequently, in, the same connection, the court quotes from McCardle v. Indianapolis Water Company, 272 U. S. 400, 47 S. Ct. 144, 71 L. Ed. 316, where the language is, “that the judicial power to declare legislative action invalid upon constitutional grounds is to be exercised only in clear eases.” It would be hard to distinguish the difference in the weight of proof “beyond a reasonable doubt” and proof which is “clear and convincing,” or “clear and satisfactory.” If, when the evidence is completed, the court entertains a reasonable doubt of the confiscatory nature of the rates, it cannot be said that the proof is clear and convincing; and, if it is not beyond a reasonable doubt, it is not sufficiently convincing and satisfactory to stay the action of a state. In a still later case, though not a rate controversy, South Carolina v. Bailey, 289 U. S. 412, 421, 53 S. Ct. 667, 671, 77 L. Ed. 1292 (May 22, 1933), the court indicated that a showing by clear and satisfactory evidence was synonymous with proof beyond a reasonable doubt. The court said: “Considering the Constitution and statute and the declarations of this Court, we may not properly approve the discharge of the respondent unless it appears from the record that he succeeded in showing by clear and satisfactory evidence that he was outside the limits of South Carolina at the time of the homicide. Stated otherwise, he should not have been released unless it appeared beyond reasonable doubt that he was without the state of South Carolina when the alleged offense was committed and, consequently, could not be a fugitive from her justice.”
But, whatever may be the distinction between the phrases, it would make no difference in this ease, because the court found that the proof of confiscation was not shown by evidence which was either clear and convincing or satisfactory. In fact, the testimony to the contrary was accepted by the court.
It may be true that in large part I am differing with the master upon the weight and credibility of testimony, and the interpretation thereof. It is undoubtedly true that he saw and heard the living witnesses testify, and enjoyed all the advantages incident to making observations at the hearings. Due allowance has been made for this; his report has been treated as presumptively correct, as provided by Equity Rule 61½ (28 USCA § 723), but that rule also provides that “the court may adopt the same, or may modify or reject the same in whole or in part when the court in the exercise of its judgment is fully satisfied that error has been committed.” This conclusion, which has been reached by the court (upheld by the defendants and denied by the plaintiff), can be verified only by a reading of the testimony in extenso.
Much stress is laid upon the fact that the books of the company are kept in a manner prescribed by the Interstate Commerce Commission, but compliance with forms of bookkeeping does not give conclusive verity to entries made upon the books, when, upon *574cross-examination, or otherwise, it appears that the entries were not original ones and do not record actual transactions, but estimates, allocations, and prorated items. What I mean is illustrated time and again in the testimony of Mr. Sloan, Mr. Snell, and Mr. Scott.
I am convinced that the plaintiff’s local exchange property in San Antonio has not been subjected to confiscation during the years under review, and that no error was committed in dismissing the bill. A decree may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218974/ | HUTCHESON, Circuit Judge.
Plaintiff, having sustained a fire loss, sued at law the Eureka-Security Fire & Marine Insurance Company and other insurance companies upon their covering policies. A binding award of appraisers was presented in defense. Plaintiff thereupon filed an equitable plea to set aside and vacate the award. A jury having been waived, the issues, legal as well as equitable, were set for trial before the judge. These issues were: (1) Whether there had been a total loss, and the. defendants were therefore liable at all events as on valued policies for their face, $16,000; (2) whether the award of the appraisers was not a valid and binding award because incomplete, par-trial, arbitrary, and unjust; (3) what was the extent of the actual loss plaintiff had sustained?
Without discussing the evidence, it is sufficient to say, of the first issue, that no case of total loss was made out by the plaintiff. On the contrary, the evidence so plainly shows a substantial portion of the building unburned that, though plaintiff did argue on the issue of damage that more than $16,000 damage had been sustained, it was not seriously contended that the building was a total loss.
On the second issue, however, whether the award should be set aside, plaintiff argued vigorously and convincingly that the failure of the appraisers to find sound as well as damage value as required by the appraisal clause of the policy, taken together with the great inadequacy of the award, the undisputed evidence of the partisan and partial attitude of the appraisers; together with the fact established that in making the appraisal of the extent of the damage that which was not seen was to a large extent taken on faith without the adequate investigation which the conditions required, deprived the appraisal of binding effect, and left the matter at large for the court to determine.
The evidence overwhelms here that the appraiser for the insurers, looking upon himself as their champion, frankly and openly proceeded with his part in the appraisement with the purpose of protecting and .advancing their interests, and in a manner calculated to do so, regarding the appraiser for the plaintiff as the opposing champion for his side. Resourceful, skillful, and energetic, in diligence and preparedness he overwhelmed the other appraiser, who, though as complete, was by no means as effective a partisan. In fact, plaintiff’s appraiser, while stubbornly insisting on a total loss, was so unenergetie and unhelpful in combating the specific contentions of the insurer’s man at arms that the umpire was forced to climb into the lists himself and fend a little for the plaintiff’s side to keep the insurers’ champion from sweeping the field. This resulted in imposing on the umpire for a brief space a great burden of preparation and consideration which it was not contemplated in the agreement he should *575have to undertake. It resulted also in raising the figures which the appraiser for the insurers had come prepared to maintain from something over $5,000 to $8,000 finally arrived at. It did not result, however, in bringing about an appraisement of the kind intended, in which each appraiser, proceeding in a disinterested and impartial way, would undertake to arrive at a fair and impartial result, submitting to the umpire for decision the points of difference upon which they could not agree, nor did it result in a just award. The evidence introduced before me leaves no question but that the sum awarded is greatly less than the damage sustained. If such an appraisement, notwithstanding the manner of its conducting, had resulted in substantial justice, that is, in an award representing within reasonable limits the damage sustained, a court of equity might well sustain it. Failing to do so, it must fall.
In addition to the fundamental vice of partisanship whieh has deprived the proeeed’ings of the quasi judicial east they should have, other matters, .the failure of the appraisers to carefully investigate and determine the extent of the damage to the unexposed studding, the failure of the original award to follow the policy terms by showing sound, as well as loss value, weigh against, and, if weight were wanting, complete the overthrow of, the award. For, while there may be cases in which the mere failure alone to find sound damage in the award as first returned will not be fatal to it, especially if the appraisers later complete the finding, and while omissions and oversight as to damaged items may occur, and there may exist an alertness and interest exercised by an appraiser to bring out all the facts favorable to the side of the one appointing him smacking of partisanship, and still the award hold in equity, which regards substance and not form, all these matters have their weight in the scale, and, when all exist, then no make weights or presumptions will be thrown in, no overniee balancing of the scales will be resorted to, to sustain it.
It will serve no purpose to discuss or analyze the authorities. It is sufficient to say that appraisements of the kind in question, requiring evidence as to the damage done as well as an appraisement of the money loss, are to be governed substantially by the rules which govern arbitrations, and that, when a policy provides, as this one does, for a disinterested appraisement, an award will not be binding, unless it is made in an impartial, disinterested, and fair way, upon a full knowledge of the facts, and is couched in substantially the form the policy requires. Continental Ins. Co. v. Garrett (C. C. A.) 125 F. 589; St. Paul Fire & Marine Ins. Co. v. Tire Clearing House (C. C. A.) 58 F.(2d) 610; Reliance Ins. Co. v. Bowen (Tex. Civ. App.) 54 S.W.(2d) 597; Milwaukee Mechanics’ Ins. Co. v. West Dev. Co. (Tex. Civ. App.) 275 S. W. 203; Delaware Underwriters v. Brock, 109 Tex. 425, 211 S. W. 779; Pennsylvania Fire Ins. Co. v. Waggoner (Tex. Com. App.) 39 S.W.(2d) 593; Great Am. Ins. Co. v. Marbury (Tex. Civ. App.) 297 S. W. 584; Frick v. Christian County (C. C.) 1 F. 250.
When the third issue, the amount of actual damage, is reached, and the estimates of those who testified are examined, it is plain that a healthy skepticism must add a grain or so of salt to them, for they consist of mere opinions as to the cost of rebuilding a damaged structure; opinions which have not been and cannot be subjected to the acid test of competitive contracting. Considering all lof the opinions in the light of all the facts, especially the fact that many of these estimates have undergone changes, I am of the opinion that the award of the appraisers is somewhat farther below the actual damage than the claim of the plaintiff for the face of his poliey is above it, and I fix as a just recovery $13,000.
For this amount and his costs, plaintiff may have judgment. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218975/ | THOMAS, District Judge.
The plaintiffs, James H. Emery, patentee of letters patent No. 1,390,349, dated September 13,1921, and Louis Marchi, his exclusive licensee thereunder, have brought their bill in equity against G. C. Murphy Company, a Pennsylvania corporation, to restrain infringement of said patent and for an accounting. The patent comprehends an artificial grape, and method of producing the same. The bill, after alleging the issuance of the patent and. of the exclusive license to Marchi, further alleges that the defendant, having a regular and established place of business in Stamford, Conn., has infringed the patent within this state by making or causing to be made and selling or causing to be sold artificial grapes embodying the invention and/or produced by the method disclosed and claimed in the patent in suit.
Upon final hearing it appeared that the defendant did not itself manufacture, the alleged infringing grapes, but merely sold one bunch to the plaintiff Emery at its said place of business in Stamford. These grapes were obtained by the defendant from an undisclosed source, and whether from a manufacturer or jobber does not appear.
Broadly speaking, the specification describes and claims an artificial grape comprising a core of thermoplastic material such as wax, a coating of the same material, a stem embedded in the core, and a coating of the grape with a light powder to increase the simulation of the genuine fruit. The patentee says in his patent:
“The principal object of the invention is to produce artificial grapes which in appearance are substantially identical to the natural fruit.
“A further object is to provide a simple, quick and economical method of producing such artificial fruit.
“In carrying out the invention a two part mold of one or more natural grapes is first provided in any suitable manner, * * * The mold is then filled with a suitable quantity of any convenient or desired temporarily fluid thermoplastic composition. When the filling composition has cooled sufficiently to become viscous, a stem of suitable material, such as wire, is inserted to a proper depth in the mold. As cooling continues, the composition solidifies, the stem becomes firmly embedded in the core, the mold is then separated and the core of the grape removed. Any bur or fin surrounding the stem is removed and the grape core is finished.
“The core is now dipped in a molten bath of suitable thermoplastic material and immediately removed, sufficient of the bath material adhering to the core completely to coat the same. The coating hardens almost immediately after the core is removed from the bath, and is then dusted with a suitable finely divided light colored powder, and the artificial grape is complete.
“* * * In prodding imitations of grapes having a dark color, such as blue, it is immaterial whether the core is transparent or opaque, colored or colorless, since the outside coating 8 applied to the core will prevent the passage of light through the grape. When, however, grapes of a lighter color, such as light red or light green, are being imitated, it is important to use almost colorless and nearly transparent or at least translucent material in making the core. The remarkably close resemblance between the light colored artificial grapes produced in accordance with this invention and the natural articles results from the fact that the cores have substantially the same optical properties as the pulp of the natural grape, while the coating 8 has optical properties substantially identical to those of a natural grape skin.
*577“In order to prevent stem 9 from becoming detached from the core there is most desirably provided a bent or hook portion 10 which, when embedded in the core, securely anchors the stem in place. * * *'
“In order to increase the resemblance between the artificial grape and the natural article and also to decrease the tendency of artificial grapes to adhere to one another in warm weather, it is desirable to dust the coating with some adhesive powder of light color. The most satisfactory material for this purpose has been found to be finely divided oxid of zinc.
“While the invention may be carried out with various thermoplastic materials, such as animal, vegetable or -mineral waxes, it has been found that the best results are obtained in casting the cores when a mixture of about 10 parts of paraffin to 1 part of carnauba wax is used. The carnauba wax serves to raise the melting point of the mixture as well as to increase its hardness when in the solid state and the same mixture, with the addition of suitable coloring material, makes the best coating for the grapes.”
Epitomized, plaintiffs claim that Emery first recognized the possibility of producing a wax grape closely simulating the real fruit by easting a translucent colorless waxen core and by dipping that core in translucent colored wax; that an artificial stem, made of wire, might be easily and effectively anchored in the grape, if a bent portion of the stem is inserted in the mold while the material therein is plastic. Defendant, on the other hand, asserts that the subject-matter of each of the claims is completely met in the patent application, that the patent is void for lack of invention, and does not disclose or claim any patentable variation or change from what was common knowledge in the art at the time of Emery’s alleged invention. In support of its defense of lack of invention, defendant has submitted and referred to a number of printed articles which were admitted by stipulation of the parties to have been published more than two years prior to the date of Emery’s application for the patent in suit. They will be examined briefly.
The Practical Magazine describes the process of manufacturing wax fruit as follows :
“Wax Emit and Root Making.
“Closely allied to wax-flower making is that of wax fruit, some specimens of which are marvellous for their faithful imitation of nature. Here moulding or easting is of more importance than in flower-making; seeing this accuracy of form is the chief desideratum. Most kinds of imitative fruit are shaped in double moulds, one for each half, and if the fruit is irregular in its curvatures a tripartite mould may be needed. Say that an orange is to be imitated in wax. A smooth, damp surface of sand is prepared, into which exactly one-half of a good orange is carefully pressed. A cordon or border of tin or stiff paper is built up around it, at about half an inch distance from the orange on all sides. Plaster of Paris, in a cream-like consistency, is poured into the cell thus made, so as to fully cover the orange. When quite firm enough to handle, this plaster half mould is taken up, and the orange extricated. The orange is then turned over in the sand, and another half-mould made in a similar way. Whether fruit are east solid or hollow depends mainly on the size; if large, the mass would be heavy, and much wax wasted by solid casting; in this ease a core of some rough material is fixed in the middle of the mould, which gives a cavity to the middle of the fruit. Soft kinds of fruit, such as plums, cherries, and ripe pears, and some hard and unyielding fruits, require special management to extricate them from the half-moulds without injury to the fruit on the one hand or-to the moulds on the other. Pomegranates, medlars, pine apples etc., require moulds in more than two parts. Occasionally, elastic moulds of glue are found advantageous. Generally speaking, the colour of the wax employed is that of the lightest parts of the fruit, the deeper tints being afterwards laid on with brush or .pencil. The' chief pigments employed are such as burnt and raw umber and sienna, chrome yellow, red lead, Prussian blue, carmine lake, etc.; greens being produced by various admixtures of blue and yellow. Certain small varieties of fruit, such as grapes and currants, are made of glass bulbs, carefully blown to the proper shape; these are fixed by wax to wires inserted into holes, and are then dipped into melted wax of the proper colour, a very thin coating of which gives the proper kind of semi-transparency to the glass, and at the same time a smoothness of surface not inaptly resembling that of the natural fruit. The fastening of the various fruits to imitative stems, leaves, leaflets, etc., is an affair of wires, silken thread, strips of green paper, white flock, arrow-root paste, gum, mastic varnish, with the other simple materials and tools employed in artificial flower-making.”
Godey’s "Lady’s Book and Magazine, vol. 52, page 20, published in 1856, describes a similar process; first, casting the fruit in *578wax, and, second, painting the casting to complete the simulation. I quote the following:
“Waxen Fruit.
“The art of making Waxen Fruit includes every small object made in a mould; thus, the same instructions that direct to make an orange, are equally applicable to form an egg, a pea, a cucumber, the stem of a cactus, a doll, a bust, or any similar article, observing that the principle upon which all are formed is, that a mould is requisite. This is first to he made or procured, then wax is to be cast in it, sometimes solid, sometimes hollow. In many cases the objects will now be completely finished, with the exception of just trimming around where the mould joined; in other eases, the wax eastings are to be painted with dry colors for some, and wet colors for others; and in different manners, according to the effect desired to be produced.”
Godey’s Lady’s Book and Magazine, vol. 52 (erroneously stated in the stipulation as vol. 53), pages 325, 326, also published in 1856, describes in detail the operation necessary to cast and finish an orange and other waxen fruit. The author says, with respect to the formation of smaller fruit:
“The strawberry, raspberry, and cherry may be east white, or some of them lake and white. The egg plum, and several of the pears and apples, may he yellow. The innumerable shades of green may be formed of different admixtures of chrome yellow and Prussian blue.
“ * * * After the waxen fruit are cast, they require first to have the mark or ridge left by the joints of the mould carefully pared off with a penknife, and then generally the knife-marks smoothed off with a small piece of rag, dipped in turpentine or spirits of wine; very numerous fruits will after this simple operation be quite finished, as the orange, lemon, shaddock, walnut, and all other fruits which are of uniform color. The beauty, however, of most fruits lies not merely in their shape, hut in a correct imitation of their bloom, rosiness, down, streaks, specks, and so on; and in imitating these properly, consists the only difficulty of waxen fruit making.”
And on page 404 of the same volume, we read: “The fruit, if cast all at one time, should generally he east of the lighter color, and the other color painted on afterwards, according to nature; thus of the half orange we should cast it yellow, and afterwards paint the pips (if visible) white, and the rind orange color, made chiefly of red lead.”
The article goes on to describe a double casting process whereby the internal and external portion of the fruit may be cast separately in their proper colors. The last of the Godey publications states that some few fruits such as grapes and currants are not made in wax but are made with halls of glass, stalked, colored, and tied together. These glass balls are dipped in molten wax colored with Prussian blue or lake. The article says that the film of wax over the glass bulb will give to the grape “all the semi-transparency of the real fruit.” In this connection the article in the Practical Magazine, supra, also speaks of forming grapes of glass balls. It says: “Certain small varieties of fruit, such as grapes and currants, are made of glass bulbs, carefully blown to the proper shape; these are fixed by wax to wires inserted into holes, and are dipped into melted wax of the proper colour, a very thin coating of which gives the proper kind of semi-transparency to the glass, and at the same time a smoothness of surface not inaptly resembling that of the natural fruit.”
Another publication in evidence is Pomología Artificíale Seeondo II Sistema Gamier —Valletti, received in the United States Patent Office Library in 1894. The translation of this article describes a process of forming grapes (and currants) by entwining grape seeds about a thin brass wire which will eventually serve as the” stem of the grape. The seeds and wire are then dipped in a melted paste composed of dammar resin and walnut oil and then in cold water. This dipping is continued until a ball is formed on the end of the wire about the size of the grape. The ball is then shaped with a sharp knife, after which the grape may be colored by successively -dipping the grape in a colored paste of 'dammar resin and walnut oil and in cold water until a satisfactory color has been secured. The finished grape, the article says, is often covered with a crust of greenish dust to imitate the dust of the grape.
Still another prior publication is the Scientific American Supplement of April 20, 1918, which describes and illustrates pictorially wax modeling of flowers, fruits, and vegetables.
From a study of all the prior publications it is clear that at the time Emery entered into the field of wax molding there was little or no opportunity for the development of anything radically new. The art itself was of ancient origin, and had been practiced not only professionally and commercially, but as a pastime in the home. Speaking specifically and *579in terms of Emery’s specification, we find from these publications that the casting of various kinds of waxen fruit in molds was old; that it was old to color the fruit by penetrating the whole substance, by tinting the surface with paint, or by means of dipping. It was also old to obtain the proper colors to a fruit such as apples and oranges by double easting; it was old to use hooked wires embedded in the article as stems and to coat the surface of a finished grape with a fine powder to simulate the bloom on the natural grape. It was old to cast the core of the fruit white and to paint the surface in colors, and, generally, the various colors of the different fruits both inside and out were imitated wherever necessary or desirable to make perfect the imitation.
Claims 1, 2, 3, 4, 5, 6, 7,10, 11,12, and 13 are in issue and relied upon by the plaintiffs. Claim 3 is typical of the Emery disclosure. It reads: “3. An artificial grape comprising a core of colorless translucent wax and a coating of colored translucent wax covering said core.”
Plaintiffs, in their brief, argue that Emery has demonstrated the possibility of making an artificial grape “truly representative of a natural grape by using a translucent eolorless core and a translucent colored coating and that wax might be used for this purpose.” Plaintiffs urge that, when fairly understood, it is obvious that Emery wished to avoid any dominant color in the core of the grape which would show through the translucent coating. Prom this it would appear that the plaintiffs rely for patentable novelty on the alleged translucent or semitransparent character of the colorless core and the colored covering of the artificial grape. The prior publications show that white wax, dammar resin, and glass, all of which are thermoplastic materials and translucent, had been used in the manufacture of simulated fruits of various kinds, both for the eolorless core and the colored covering, achieving very effectively the result claimed by Emery.
Assuming that Emery did produce a simulation of a grape by using, in combination, a core of eolorless translucent thermoplastic material such as wax, and a thermoplastic coating of colored material covering the same, did that contribution to the art constitute invention? It is not every advance, even though it be useful, that may be classified as inventive in character. Invention is defined in Walker on Patents (6th Ed.) § 59, as follows: “To be a patentable invention there must be present a creative mental conception as distinguished from the ordinary faculties of reasoning upon materials supplied by a special knowledge, and the facility of manipulation which results from its habitual and intelligent practice by those skilled in the art.”
In Pyrene Mfg. Co. v. Boyce et al., 292 P. 480, at page 481, Judge Woolley, speaking for the Circuit Court of Appeals for the Third Circuit, after stating that it is a trite saying that invention defies definition, but through long use the word has acquired certain characteristics which at least give direction to its meaning, gives an admirable definition of the word. He says: “Invention is a concept; a thing evolved from the mind. It is not a revelation of something which exists and was unknown, but is the creation of something which did not exist before, possessing the elements of novelty and utility in kind and measure different from and greater than what the art might expect from its skilled workers.”
Applying these definitions to the facts in evidence in this ease, it is difficult to see how, with knowledge and in the light of the above-quoted prior art, it can be considered invention to have produced a grape having a colorless core of translucent thermoplastic material such as wax and a colored waxen covering therefor. I therefore conclude that claim 3 is invalid as not disclosing invention over the prior art. Claim 2 which is somewhat broader in scope is likewise invalid, and for the same reason. Claim 4 has an added element, to wit, a light colored powder adhering to the surface of the coating of the grape, and claims 6, 7, and 13 have as an element a projecting stem having a bent portion embedded within the core. These additions do not impart patentable novelty to the claims, since, as heretofore shown, stems of various kinds embedded in the core were common in wax fruit making, as was also the use of powder to dust the grapes. See in particular the Pomología article, supra. Claims 1 and 12, not being limited to a translucent core, axe broader than the invention and are definitely anticipated by the patent application cited. See particularly the Godey article, vol. 52, page 20. Claim 5 is invalid because it involves no invention in view of the patent application, as there is no evidence in the record that the use of oxid of zinc as a dusting powder possessed any novel function or is anything more than a mere substitution of material.
This leaves for consideration method, claims 10 and 11 which purport to describe the process whereby the patented artificial *580grape is produced. Defendant does not infringe these claims. It is a seller merely, and ordinarily a seller cannot be held an infringer. In American Graphophone Co. v. Gimbel Bros. (D. C.) 234 F. 361, 368 (affirmed (C. C. A.) 240 F. 971) this court said: “But a process patent is not infringed by selling the product, and the vendee of a product which has been made in infringement of a patented process cannot be held liable to the patentee, or in any extent to be an infringer. Similarity or even identity in appearance of a product is not sufficient, and the charge of infringement can only be sustained by certain proof that the defendant uses the process of the patent” — and eases cited.
But plaintiffs say that this defendant should be held as a contributory infringer for aiding and abetting the manufacture of infringing grapes. One must in some manner, participate intentionally in some subsequent infringement of a patent, which occurs in accordance with his invention, to be classified and held as a contributory infringer thereof. Walker on Patents (6th Ed.) § 457. There is no evidence here that this defendant knew who manufactured Defendant’s Exhibit 2. Furthermore, in answer to plaintiffs’ interrogatories, defendant stated specifically that it has no knowledge as to the internal construction of any grapes sold by it, or the process of manufacture, or the materials of which they are composed. This is, therefore, not one of those instances of knowingly aiding and abetting infringement of a process patent of which General Electric Co. v. De Forest (C. C. A.) 28 F.(2d) 641, relied upon by the plaintiff, is an example. However, the successive steps defined in claims 10 and 11 are substantially disclosed in the prior art, and do not possess any element of novelty “different or greater than what the art might expect from its skilled workers.”
Since the product is, in my opinion, destitute of patentable novelty, proof of commercial utility urged upon the court by plaintiffs in support of invention is irrelevant and unimportant. Duer v. Corbin Cabinet Lock Company, 149 U. S. 216, 13 S. Ct. 850, 37 L. Ed. 707. Commercial success is often an unsafe criterion, even of utility. To be of value in judging patentability, the success must be due to the merit of the article and attributable to the claims in suit.
I therefore conclude and find that the claims in suit are invalid for the reasons stated, and that claims 10 and 11 have not been infringed by defendant.
A decree may be entered for defendant dismissing the bill, with costs to abide the event. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218976/ | BONDY, District Judge.
The petitioner is a Chinese citizen ordered deported because he has remained in the country for a longer time than permitted.
He entered the country in December, 1927, under a certificate of identity issued pursuant to section 6 of the Act of May 6, 1882, as amended (8 USCA § 265), as “an alien visiting the United States temporarily as a tourist or temporarily for business or pleasure” (Immigration Act 1924, § 3 (2), 8 USCA § 203 (2), for a probable duration of one year. Subsequently he obtained from the Department of Labor extensions of time, the last on October 7,1930, upon filing a bond conditioned upon his departure on or before December 1, 1931. On November 10, 1931, he applied for a change from his status as traveler, whieh is of temporary duration (8 USCA § 203 (2), to that of merehánt, whieh is of indefinite duration (8 USCA § 203 (6). This application was denied by the Department, and he was ordered to depart voluntarily. The alien having failed to comply with this order, a warrant for his arrest was issued. After -a hearing, he was ordered deported, and thereupon obtained the writ of habeas, corpus now before the court.
The alien was- a merchant in China before he came to this country. _ Ever since a. short time after his arrival, he has been similarly engaged in the United States.
The alien having remained here longer than permitted by the certificate under which he entered and the extensions granted him, the order of deportation was properly made (Immigration Act 1924, § 14, 8 USCA § 214), unless the Department’s refusal to permit the requested change of status was authorized.
The Department, in refusing the request, acted under a regulation specifically covering the situation, contained in the Rules of October 1,1926, governing the admission of Chinese. Paragraph 1, Rule 18, provides: “Chinese admitted to the United States as students under section 4 (e) of the Immigration Act of 1924; those admitted as travelers for business or pleasure under section 3 (2); or those admitted solely to carry on trade under and in-pursuance of a treaty of commerce and navigation existing on May 26, 1924 under section 3 (6) of said act; must maintain the status under whieh admitted while remaining in the United States (section 15, Immigration Act of 1924), and consequently cannot change from one exempt status to another.”
To sustain the alien’s position, this regulation must be found invalid. It purports to-have been made in pursuance of section 15 of the Immigration Act of 1924 (8 USCA § 215), which provides: “The admission to the United States of an alien excepted from the class of immigrants by clause (2), (3), (4), (5) , or (6) of section 3 [section 203, of this title], or declared to be a nonquota immigrant by subdivision (e) of section 4 [section 204, of this title], shall be for such time as may be by regulations prescribed, and under such conditions as may he by regulations prescribed, (including, when deemed necessary for the-classes mentioned in clause (2), (3), (4), or (6) of section 3 [203], the giving of bond with sufficient surety, in such sum and containing such conditions as may be by regulations prescribed) to insure that, at the expiration of such time or upon failure to maintain the status under whieh admitted, he will depart from the United States.”
Counsel for the alien contend that the word “status” in the foregoing statute refers to the distinction between immigrants and nonimmigrants and not to the different exempt classes of nonimmigrants, and that' therefore the Labor Department has not the power to order an alien deported so long as he remains'in any one-of the classes of non-immigrants.
*593Section 6 of the Act of May 6, 1882, as amended (8 USCA § 265), prescribes in considerable detail tbe procedure for obtaining the certificate required of Chinese for entrance into the United States, and in so doing treats the several classes of exempt Chinese with strict distinctness. The detailed information required of Chinese merchants is different from that required of Chinese travelers. The importance of these different requirements is emphasized by the provision that the certificate “shall be the sole evidence permissible on the part of the person so producing the same to establish a right of entry into the United States.” This provision was not contained in the statute as originally enacted in 1882 (22 Stat. 60), but was added in 1884 (23 Stat. 116).
A consideration of these provisions leads to the conclusion that the distinctness with which each exempt class is treated creates a separate status for each and that the Department, in passing the regulation in question, correctly interpreted the meaning of the word “status” contained in section 15 of the act of 1924.
The conclusion that a Chinese temporarily admitted as a traveler cannot remain as a merchant was reached in Ex parte Wong Gar Wah (C. C. A.) 18 P.(2d) 250, certiorari denied Wong Gar Wah v. Carr, 275 U. S. 529, 48 S. Ct. 21, 72 L. Ed. 409.
It is urged the statutes so construed are not in conformity with the Treaty with China, concluded November 17,1880, and proclaimed October 5, 1881 (22 Stat. 826), pursuant to which the act of 1882 was passed. This treaty, after providing that the United States may “regulate, limit, or suspend” (article 1) the coming of Chinese laborers, continues (article 2): “Chinese subjects, whether proceeding to the United States as teachers, students, merchants or from curiosity, together with their body -and household servants * * * shall be allowed to go and come of their own free will and accord. * * * ”
Article 4 thereof expressly provides for further legislation in accordance with the treaty. To regulate the admission of exempt Chinese and to minimize the opportunities for evasion of the exclusion laws by meticulously providing for the method by which a Chinese alien might establish that he is within one of the exempt classes is not inconsistent with either the letter or spirit of the treaty.
There is nothing to the contrary in the decision in Dang Foo v. Day (C. C. A.) 50 F.(2d) 116. In that case the court held that, where a Chinese alien has been admitted to this country as a traveler under a certificate and court order which, as viewed by the court, placed no limitation upon the length of his stay, the Department of Labor was without authority to exact a bond conditioned on his departure by a certain date. The regulation here direetly involved was not mentioned in the prevailing opinion of the court or in the briefs of counsel. The necessity of considering the validity of the regulation and the consequent occasion for a detailed examination of the statutes was not presented to the court.
The writ accordingly must be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218978/ | COXE, District Judge.
This is a motion by the plaintiff to dismiss all four counterclaims in the defendant’s amended answer on the grounds of insufficiency. It is also sought by the motion to dismiss the second counterclaim as improperly interposed, and to strike out the first defense as insufficient in law.
The action is to recover $20,634.98 as a balance for goods sold and delivered to the defendant between October 29; 1930; and January 3, 1931. The amended answer, after denying the material allegations of the complaint, contains a first separate defense and four counterclaims; and it concludes with a prayer for affirmative damages in a substantial amount.
The first counterclaim alleges that the plaintiff and the defendant entered into an oral agreement on January 22, 1929; covering a period from February 1, 1929, to June 1, 1930, which was subsequently extended to February 1,1933, and by which agreement the plaintiff was to manufacture and sell to the defendant, and the defendant was to purchase and pay for, “radios and other products to the quantity and to the extent which defendant might require in order to supply its trade as the plaintiff’s distributor in the territory set forth” in a written contract attached to the answer, marked “Exhibit A,” and dated as of February 1,1929; but stating “the terms of the agreement arrived at on January 22, 1929.” It is further alleged that it was agreed that if the plaintiff lowered its prices to others for the same products, the defendant would be entitled to a refund equal to the difference between the new and old prices on all products “billed to the defendant within the preceding ninety days and which were on hand unsold at the time of said reduction.” It is then alleged that on October 15, 1930, the plaintiff secretly reduced its prices on such products, and that the defendant thereupon became entitled to a refund of $30,922.73.
The plaintiff insists that inasmuch as the defendant has pleaded the written agreement of February 1,1929, it should not be permitted to vary its terms by alleging and proving a contemporaneous oral agreement covering the same ground. And it is perfectly obvious that the allegations with respect to the oral agreement, as contained in the answer, are directly at variance with the terms of the written agreement, especially as the written agreement contains no express covenants binding the plaintiff to sell or the defendant to buy any products whatever; whereas, the oral agreement as alleged contains mutual covenants that the plaintiff will “manufacture and sell,” and the defendant will “purchase” and “pay for” “radios and other products” “to the quantity and to the extent” required by the defendant’s needs. I am clear that *602these allegations with respeet to the oral agreement have no proper place in the pleading and should be disregarded.
There remain in the first counterclaim the allegations on price cutting. This is expressly provided for in' the written agreement, and if the allegations are substantiated I think they may form the basis of affirmative relief against the plaintiff. The plaintiff urges that there can be no refund until the defendant has paid for the products purchased at billed prices, and has demanded repayment. That seems, however, to be an overtechnical criticism of the pleading, especially as a refund may be either in the form of cash or a credit memorandum. The question is whether the plaintiff has reduced its prices so as to entitle the defendant to a refund as provided in the agreement; and the determination of that question is not dependent on whether there has been a demand or not. The plaintiff insists also that the counterclaim is defective in that it fails to allege performance by the defendant or an excuse for nonperformance. But in that respeet, also, I think the objection must be overruled. I conclude, therefore, that the motion, with respeet to the first counterclaim, should be granted, with permission to the defendant to amend by confining the allegations strictly to any breaches of the written agreement by the plaintiff.
The second counterclaim contains similar allegations to the first with respeet to the oral agreement, and is to be condemned for the reasons already indicated. It also contains allegations that the plaintiff (1) falsely represented in January, 1929, that it would bring out a $125 radio set; and (3) falsely represented from July to December, 1930, that it would not “dump” its products, and that it was in business “for -a long pull.” Manifestly these allegations are insufficient. They are mere promissory representations, which, under well-established principles, cannot be made the basis of a fraud action. Adams v. Gillig, 199 N. Y. 314, 92 N. E. 670, 32 L. R. A. (N. S.) 127, 20 Ann. Cas. 910; Field v. Scubert Bearing Co., 179 App. Div. 780, 167 N. Y. S. 294. Furthermore, the written agreement is explicit with respect to such representations. In one place it is stated that it is “understood” that the plaintiff “will endeavor to have ready to market on or about June 1, 1929, a reasonably complete line of radio sets, * * * ” showing that the entire subject of the new radio sets was fully considered and covered by the agreement. Then again with respect to the allegation regarding dumping, the agreement provides that the plaintiff “will not make any distribution of said products in said territory.” I am clear, therefore, that the second counterclaim does not state facts sufficient to constitute a cause of action.
The third and fourth counterclaims are based on the theory that there was an implied term in the agreement that the plaintiff would continue in business, and would continue to supply the defendant with radio sets and products sufficient to meet its requirements; and in order to sustain this theory it is again alleged that there was a contemporaneous oral agreement containing mutual covenants of sale and purchase on the part of the plaintiff -and the defendant. The written agreement, however, contains no- such covenants on the part of the plaintiff or of the defendant; and it is, therefore, difficult to see how such a covenant can be implied. The agreement is the usual form of distributor’s contract, and merely obligates the plaintiff to keep out of the defendant’s territory, in return for which the defendant agrees to purchase and pay for at specified prices such products as it may require from time to time. The agreement is mainly unilateral, and insufficient, in my opinion, to support an implied covenant such as alleged in the fourth counterclaim. Schlegel Mfg. Co. v. Peter Cooper’s Glue Factory, 231 N. Y. 459, 132 N. E. 148, 24 A. L. R. 1348; Smith v. Diem, 223 App. Div. 572; 229 N. Y. S. 56; Friede v. White Co. (D. C.) 244 F. 272.
And I do not think that the failure of the plaintiff to continue in business can be treated as a cancellation of the agreement so as to obligate the plaintiff to take over the defendant’s lease, and pay for the furniture and fixtures, as alleged in the third counterclaim. The provision of the written contract, with respeet to cancellation, has reference principally to the contingency that the plaintiff may desire to take over the defendant’s territory; and in the event that this should occur it was proper that the plaintiff should bind itself to assume the defendant’s lease, and pay for the furniture and -fixtures. But as long as there was no implied covenant, on the part of the plaintiff to remain in business, it can hardly be urged that the discontinuance of the business was in effect a cancellation of the agreement.
I conclude that the third and fourth counterclaims are insufficient as not containing facts sufficient to state causes of action.
With respeet to the first defense, I cannot see that it adds anything to the denials in oth*603er parts of the amended answer, and for the reasons already given with respect to the counterclaims, I think it should be stricken out.
The motion to dismiss the first defense and the first, second, third, and fourth counterclaims is granted, with permission to the defendant to amend within twenty days in line with this memorandum. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218980/ | NORCROSS, District Judge.
Plaintiff by his bill of complaint prays that a claim filed with the defendant E. J. Seaborn, as state bank examiner, for a balance of account of moneys deposited by plaintiff with the Lyon County Bank, be adjudged to be a first preferred claim, and defendant be directed to pay the same with accrued interest out of the assets of said bank, and for such other and further relief as is just and equitable in the premises. To the bill of complaint defendant Seaborn, as state bank examiner, interposed a motion to dismiss upon the grounds that the complaint fails to state facts sufficient to constitute a cause of action or any matter of equity entitling plaintiff to the relief prayed for, or to any relief against said defendant. The motion was submitted upon briefs and oral argument.
The material allegations of the complaint are, in substance, as follows:
On April 2, 1925, plaintiff, by order of this court, was appointed receiver of the Nevada Copper Belt Railroad Company, a corporation organized under the laws of the state of Maine, and ever since has been and now is such receiver. On or about February 16,1932, the Lyon County Bank ceased to do a banking business, and was taken in charge by the defendant state bank examiner in pursuance of the laws of the state of Nevada. Pursuant to notice to persons having claims against said bank, plaintiff filed his proof of preferred claim, a copy of which is attached as an exhibit to the complaint. Thereafter, on September 20, 1932, said defendant rejected plaintiff’s claim as a preferred claim, and approved the same as a general claim against the assets of said Bank. Plaintiff’s said claim arises by virtue of the fact that as such receiver he deposited with said bank, under order and direction of this court, moneys accruing to such receiver, and that on the date when said defendant took charge of said bank there was on deposit therein, and due to plaintiff, the sum of $96,397.98. Said moneys constituted funds received by plaintiff while acting as an officer of this court. Plaintiff further alleges: “That the moneys deposited by plaintiff in sqid Lyon County Bank and now in the possession of defendant E. J. Seaborn, as State Bank Examiner in charge of said Bank, constituted moneys of the United States and are a first preferred claim against the assets in the hands of said defendant. * * * ”
The claim as filed and by copy made a part of the complaint contains the following recitals:
“That the said Lyon County Bank was designated by the Court as a depositary for the said funds in the hands of the Receiver, and thereupon claimant, as Receiver, deposited the said moneys in said Bank from time to time as the same came into his possession as such officer.
“That by virtue of the facts set forth hereinabove the said moneys are and constitute Federal moneys of the United States and constitute and are a first preferred claim against the assets in the hands of the State Bank Examiner as Receiver for said Lyon County Bank.”
As courts in construing pleadings will take cognizance of their own records or of facts within their judicial knowledge, it is here appropriate to note, though unnecessary to a determination of the questions presented, that the order appointing plaintiff as receiver contains the provision: “The said receiver ~ * shall deposit the moneys coming into his hands in some bank or banks, reporting to the Court the bank or banks so selected, and shall make to the Court at least once in each three months a report of all receipts and expenses.”
*610It appears both from specific allegations of the complaint and from the claim as filed with the state bank examiner that plaintiff asserts a right to have the balance of the receiver’s account in the closed bank adjudged a preferred claim, and paid in advance of payments to general creditors upon the assumption that the moneys so remaining on deposit “constituted moneys of the United States,” or, as expressed in the claim, “Federal moneys of the United States.”
No authorities are cited supporting the proposition that moneys derived from the operation of a private corporation while being so operated under a federal court receivership may be regarded as moneys of the United States. Not only are there no authorities so holding, but it is clear that the moneys in question are in no sense moneys of the United States. Florida Banking & Trust Co. v. Union Indemnity Co. (C. C. A.) 55 F.(2d) 640, 83 A. L. R. 1102 (certiorari denied 287 U. S. 600, 53 S. Ct. 6, 77 L. Ed. -); American Surety Co. v. Akron Savings Bank, 212 U. S. 557, 29 S. Ct. 686, 53 L. Ed. 651; Id., 74 Ohio St. 465, 78 N. E. 1116; State ex rel. Rankin v. Bank, 85 Mont. 532, 281 P. 341 (certiorari denied 281 U. S. 725, 50 S. Ct. 239, 74 L. Ed. 1142); Stephenson v. Taylor, 185 Ark. 1100, 51 S.W.(2d) 508. The Stephenson Case last cited was a case practically identical with the ease at bar. A receiver of a railroad appointed by a federal court was claiming a preferred right to funds in a closed bank upon the contention that his deposit was property of the United States.
Counsel for plaintiff in the brief filed cites authorities to support the statement that “moneys in the hands of officers of the United States such as post masters, officers of the forest service, Indian Agents and others, even though deposited in banks, in their own name, are construed to be entitled to preference.” It does not follow, however, that a receiver of a private corporation, merely because he happens to be appointed by a federal court, is an officer of the United States, or that funds in his possession as such receiver are moneys of the United States. Where money, in fact is the property of the United States (31 USCA § 191), the preference exists, otherwise it does not. The fact that a corporation is in receivership in a federal court instead of a state court, by reason of the mere fact of diversity of citizenship, manifestly could not have the effect of changing the property of the corporation into'that of property of the United States. The ownership of the property is not changed by the appointment of a receiver by either a federal or state court. Quincy, etc., R. R. Co. v. Humphreys, 145 U. S. 82, 12 S. Ct. 787, 36 L. Ed. 632; Union Bank v. Kansas City Bank, 136 U. S. 223, 10 S. Ct. 1013, 34 L. Ed. 341; 53 C. J. 96.
While it is clear that plaintiff has no right of preference upon the ground specifically asserted, that the deposit in question constitutes moneys of the United States, counsel for plaintiff takes the position also that “deposits made by receiver remain the property of the court and all such moneys are in custodia legis; the receiver’s possession is the possession of the court.” Further it is contended that: “Parties (including banks) who have possession of Court moneys are bailees by virtue of the order of the Court.” While counsel cite authorities, dealing with questions of moneys in custodia legis and banks holding moneys as bailees by virtue of orders of court, no authorities are cited, and we think none may be found,, holding that, in the case of the liquidation of a suspended bank, moneys on deposit by a court receiver in the absence of some statutory provision would be entitled to a preference merely because of such reeeivershipThis is not a ease similar to that of money deposited with a court and by the court directed to be deposited by its clerk in some bank upon special deposit pending the termination of the litigation, but a case where a comparatively large private corporation is allowed to carry on its business through a receiver appointed by the court. The receiver takes-charge of the management of the property, but the title to the property remains in the corporation, and the profits, if any, or the proceeds of sale, subject to expenses of administration and the payment of creditors, belong to the stockholders.
While there is no allegation in the complaint that the deposits in the bank made by the receiver were special deposits, or were made under any understanding creating the relationship of bailor and bailee, it may be assumed from the allegations of the complaint, without reference to the files in the receivership ease, that such a situation did not exist. We have here the case of a railroad being operated by a receiver appointed' by the court in an action instituted by the said bank, as trustee for the bondholders. The business of the company is to be carried on until an opportune time for sale or other liquidation, which means the necessity of many transactions daily; employees paid *611dheir salaries or wages, ordinary supplies purchased, and accounts incurred and settled with connecting railroads. Such business transactions suggest the convenience, if not necessity, of carrying an open cheeking account with some bank. In the absence of any other showing, such a method of doing business with a bank negatives any suggestion of bailment. There then remains the mere situation that the moneys in question were deposited in the bank by a court receiver with the knowledge of the bank that the depositor was such receiver. This situation alone does not create a preferred account. Commercial Bank v. Armstrong, 148 U. S. 50, 13 S. Ct. 533, 37 L. Ed. 363; Minard v. Watts (C. C.) 186 F. 245; Henkel v. Carnegie Trust Co., 213 N. Y. 185, 107 N. E. 346; Woodward’s Petition, 307 Pa. 485, 161 A. 738; McDonald v. Fulton, 125 Ohio St. 507, 182 N. E. 504, 83 A. L. R. 1107; Andrew v. Bank, 208 Iowa, 1248, 224 N. W. 499 (certiorari denied 281 U. S. 725, 50 S. Ct. 240, 74 L. Ed. 1142); Surprise v. First Trust & Sav. Bank (Ind.) 180 N. E. 926; Montana-Wyoming Ass’n v. Commercial Nat. Bank, 80 Mont. 174, 259 P. 1060; Re Commercial & Sav. Bank (S. D.) 236 N. W. 271; 7 C. J. 633.
While the question of jurisdiction has not been raised, attention is directed to two comparatively recent decisions of the Circuit Court of Appeals of this circuit, Mullendore v. American Surety Co., 27 F.(2d) 572 (certiorari denied 278 U. S. 653, 49 S. Ct. 178, 73 L. Ed. 563), and Merryweather v. United States, 12 F.(2d) 407.
The motion to dismiss is granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218981/ | NORCROSS, District Judge.
This is a libel in personam brought to recover damages or indemnity in the sum of $5,000 and for maintenance in the sum of $700 for the period of time libelant claims he was unable to work. The ground of recovery is based on the alleged negligence of the master of the vessel Frank D. Stout in refusing libelant a “hospital slip,” which he alleges would have entitled him to medical treatment at the United States Marine Hospital in San Francisco.
Libelant alleges in substance that at the times set out in the libel the Andrew F. Ma-honey Company was the managing owner of the vessel Frank D. Stout; that on or about October 4, 1927, libelees were the owners and operators of said vessel; that on said date libelant entered the service of said libelees in the capacity of fireman; that on or about November 13, 1927, while'so employed, he contracted leprosy without fault on his part; that he did not know he had leprosy, but showed the master of the vessel a red infection about an inch in diameter with small pimples on the right side of his face, which was the beginning of the disease, and asked for a slip to go to the Marine Hospital, which was refused; that he was not able to remain on the vessel by reason of said infec*612ti'on, and quit and went to the United States Marine Hospital at San Francisco, but was refused admission because be bad no pass or slip; that said leprosy became more severe, and on or about August 24, 1928, be was ordered by the United States Publie Health Service at the Marine Hospital in San Francisco to go to the United States Marine Hospital at Carville, La., where he remained from August 24, 1928, to December 3, 1931, at which time he was discharged as cured. The libel was filed August 5, 1932.
Libelees deny that they were the managing owners of the vessel Frank D. Stout, and allege that it was being operated under charter parties; that they had nothing to do with its operation or control, and did not hire or pay either libelant or the master; that the relationship of employer and employee did not at any time exist between the parties to this action; that the injuries or damages libelant claims to have sustained were not caused by any negligence on their part. Libelees further allege that the claims are barred by laches. Libelant contends that the matter of laches was finally disposed of by an order of this court overruling respondents’ exceptions to the libel.
Libelant does not contend, nor is there any proof, that he contracted leprosy by reason of any negligence. It appears from the testimony that no one, including libelant, knew that he had leprosy until the disease was so diagnosed on August 6, 1927. The testimony shows that he was examined by several doctors on the day and also a few days after he left the vessel, and, when it was eventually suspected to be leprosy, he received treatment without expense to himself until he was discharged from the United States Marine Hospital at Carville, La., on December 3,193L
Libelant introduced in evidence a “Certificate of Discharge,” dated December 2, 1931, issued for a 6-month period, from the United States Marine Hospital at Carville, La., showing that he was treated in said hospital from July 26, 1929, to December 3, 1931. The “Reason for Discharge” is stated as “Leprosy, arrested, and no longer a menace to public health.” Said certificate is signed by the medical officer in charge of the hospital, and is also renewed and countersigned — as required by the certificate — by the secretary of the state board of health, each 6 months for a period of 3 years after the date of discharge, stating libelant was “examined and find no evidence of recurrence.”
To interrogatories propounded by the libelee Andrew F. Mahoney Company, libel-ant replied that he first noticed the red infection on his face on November 11,1927, and 2 days later called the same to the attention of the master when the vessel had docked at San Francisco, at which time he requested a hospital slip from the master; that he quit the service of the vessel at San Francisco on November 13, 1927; that he was refused admission to the Marine Hospital on November 13, 1927, and again on December 6,1927, on which latter date he again requested a hospital slip from the master; that on his first visit to the Marine Hospital he saw Drs. Jones, Peteh, Miller, and Hart; that he first learned that he had leprosy on August 6, 1927, at the San Francisco County Hospital.
While the testimony of medical experts was not in entire accord that libelant was afflicted with leprosy, all who testified on the subject were in agreement that the period of incubation for leprosy was.from 2 to 15 years. As libelant was on the vessel for less than 6 weeks when the first symptoms appeared, he could not have contracted the disease while in the vessel’s service.
The only act of negligence alleged is the failure of the master of the vessel to furnish a hospital slip. Assuming such slip was refused, libelant has not thereby established any actionable negligence on the part of the master. Libelant’s own witnesses testified that the so-called “hospital slip” was only one of five ways in which he could obtain treatment at the United States Marine Hospital. The testimony of Dr. Campbell, a witness for libelant, who was in charge of the Out-Patient Clinic at the United States Publie Health Service, was to the effect that libelant did not require a master’s certificate for entrance to the Marine Hospital or United States Public Health Service, and that he was not refused admittance because of his failure to have such certificate; that such service and treatment were available to him upon showing that he was a seaman, and there were five different ways that he could and would have been admitted to the hospital had he been entitled to receive treatment at that institution, and the only reason further treatment was refused was because he had not had 60 days’ continuous service upon the vessel to his credit.
Dr. Hart, a physician in the employ of the United States Public Health Service, and one of the physicians whom libelant saw on November 13, 1927, the day libelant left the ship, was called as a witness by libelant. The doctor testified to an extended study of and' experience with leprosy in the Orient, where he was engaged by the national gov*613emment in Ms professional capacity. He estimated the number of eases he had examined as between eight and ten thousand. The witness had returned from his trip to the Orient only shortly prior to the trial of tMs cause. WMle the doctor expressed some doubt as to whether libelant’s infection was leprosy, he was positive in Ms statements that, if leprosy, the type of the disease was neither painful nor disabling, and that libelant could have continued with his work until such time as the disease was definitely determined; that recovery would not have been any more prompt had the diagnosis been made at an earlier date.
The evidence is without conflict that at all times while libelant was employed on the Prank D. Stout she was being operated under charter parties. Libelees herein had nothing to do with her operation or control. They did not employ or pay either the libel-ant or master. The relationsMp of employer and employee did not at any time exist. The vessel was bought on May 2, 1927, from the California Oregon Lumber Company by the respondents herein (who own a 66 per cent, interest), and various nther persons named in the libel as respondents, but who were not served with process and have not appeared herein, subject to a charter party which had been executed by the California Oregon Lumber Company to Daugh’s Ship Crane Company prior to the purchase of the vessel. In October, 1927, a new charter party was executed by the respondent Andrew P. Mahoney Company, as managing owner, to the Finkbineguild-Lumber Company, which continued •in force until long after libelant left the service of the vessel. Both these charter parties are in evidence, and show by their terms that the charterers took over the complete control of the vessel, and the only way in which the owners remained interested was in receiving the specified payments of $75 per day for charter hire. The charter parties had the entire command, possession, and control of the vessel, and as such were in the position of owner pro hac vice. As held by the Circuit Court of Appeals in The Del Norte, 119 P. 118, the master of a vessel is not regarded as the agent of the owner during the life of the charter party. The following authorities support the same view: The Dutchess (D. C.) 16 F.(2d) 1003; Stewart v. United States Shipping Board (D. C.) 7 F.(2d) 676; The Charlotte (C. C. A.) 299 F. 595; Hills v. Leeds (D. C.) 149 P. 878; Golcar S. S. Co., Ltd., v. Tweedie Trading Co. (D. C.) 146 F. 563; American Steel-Barge Co. v. Cargo of Coal (D. C.) 107 F. 964; Posey v. Scoville (C. C.) 10 F. 140.
Libelant is not entitled to recover in this cause. Independent of the question of non-liability by reason of the charter parties, there is an entire lack of evidence respecting damages or indemnity. The evidence also is insufficient to support a recovery for maintenance.
Libelees are entitled to their costs of suit herein incurred. Decree is directed to be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218983/ | INCH, District Judge.
General Chemical Company, libelant, brings this suit against the barge Joseph J. Hock and her owner, the Eastern Transportation Company.
The controversy arises over the transportation in the barge of approximately 1,500 tons of various chemicals belonging to libel-ant.
These chemicals consisted of tri-sodium phosphate, di-sodium, nitre cake, hypo-sulphite soda, and sodium fluoride, all of which is readily susceptible to damage by water and dampness.
On or about May 27, 1931, libelant, by charter party dated that day, hired this barge from respondent, for the purpose of carrying these chemicals from Marcus Hook, Pa., to South Providence, R. I. The chemicals were contained in bags, kegs, drums, and wooden barrels.
The loading of the barge at Marcus Hook was in charge of libelant. Libelant also was in charge of her unloading'at South Providence.
No dunnage was used by libelant. First the drums were put in the aft part of the barge. These were one layer, and only ran *629about one-third the way forward. Then barrels injhree tiers fore and aft. Then on top of the barrels were placed bags. There were also some kegs, mostly placed at the ends of the barge. When this cargo was completed the hold of the barge was practically filled.
According to Warder, her master, the Hock was about 207 feet long, 34 beam, schooner built, about 2,240 tons capacity. When so loaded she had a freeboard, amidships, of about a foot and about 3 feet at bow and stern. She was an open barge without partitions in her hold. Her deck had five hatch openings with dead hatches between. These hatch openings were about 14x12 feet, while the space between or dead hatches were about 5 feet fore and aft. The hatch covers were in sections, and when down were covered by tarpaulins.
The charter agreement between the parties provided that the barge should be “tight, staunch, strong and every way fitted for sueh a voyage.”
In other words, there was this express warranty of seaworthiness in addition to the usual implied warranty. The Silvia, 171 U. S. 462, 19 S. Ct. 7, 43 L. Ed. 241.
This agreement further provided that the cargo was “to be shipped on vessel’s skin at shippers’ risk” and that if dunnage was required “same was to be furnished by charterers at their expense.”
Finally the agreement, among other things, provided that the charterers should designate where the barge would be loaded and discharged “always safely afloat.”
I mention these particular provisions for the reason that they are all to be considered in a decision of the issues here.
I have no difficulty in finding that libel-ant was solely responsible for the manner in which this barge was loaded and discharged. That the merchandise when it went on board was in good condition, and that when it was discharged some of it was found damaged by water.
While there were some cracks in her deck around the hatch coamings, etc., these, I find, were not the proximate- cause of what' subsequently occurred.
When the barge was completely loaded she was taken in tow by a tug, and after several days voyage, and on or about July 1, she duly reached the dock of libelant at South Providence. She was then taken by one of libel-ant’s tugs and placed alongside the dock where she was to be unloaded. Her master, Warder, said he inquired from “a crowd of men at the end of the pier how much water is there there” and they said, “How much water are you drawing,” and “I said 14 or 15 feet.” They said, “plenty for you,” then “I said you can place the boat to suit yourselves wherever you want to.”
Thereafter the unloading commenced by libelant’s representatives. They started at the aft part of the barge. This necessarily lightened that end and caused the forward end to lower somewhat.
■ Apparently there was a longshoremen’s strike in this neighborhood and I am convinced, from the testimony, that libelant was obliged to hire sueh men as it could. Certainly they did not have the usual negro stevedores. They were all white men with the negro head stevedore of libelant.
The unloading started about 11 o’clock on July 2, and about 3 o’clock Warder decided to use his pump and says he found it wouldn’t work for the reason that, “my primer of the pump, it got full of mud.” . The result was, he says, that before he could get this pump working sufficient water had come up over the ceiling of the barge at the forward end sufficient to cover some of the ends of the barrels standing upon it and doing damage to the contents.
However the water got into this barge, I am convinced that ordinary dunnage, which apparently is from one to two inches thick, would not have availed in keeping the contents unaffected by this water.
At this time I am not concerned with the amount of damage, "but only whether there was some damage for which respondent can be blamed.
The respondent was a private carrier, a bailee for hire. There is no doubt but that the libelant has satisfactorily shown, by credible testimony, that the cargo, when loaded upon the barge, was in undamaged condition, and that when sueh cargo was unloaded some of it was damaged by water. Whether such water damage was sea or fresh water does not appear except by inference. A witness testified that this could not be determined except by chemical analysis, and nothing of that kind is in evidence.
The libelant having made a prima facie ease, the burden was on the bailee to show how the damage occurred, and that it was due to no lack of care on its part. Bushey & Sons v. W. E. Hedger & Co. (C. C. A.) 40 F. (2d) 417; Nelson v. Woodruff, 1 Black (66 U. S.) 156, 17 L. Ed. 97; Herman v. Com*630pagnie Generate Transatlantique (C. C. A.) 242 F. 859.
Respondent blames all the water either on this failure of the pump, which in turn is blamed upon a grounding, or on the rain that subsequently fell. I have carefully considered the story told by respondent’s witness and am unable to agree with it in all respects. I am entirely concerned with whether or not respondent has borne the burden east upon it.
It is apparent, and I so find, that the voyage from Pennsylvania to South Providence was in good weather and in all respeets uneventful. There is no proof that there was any rain, or that the barge shipped any wa/ter.
We have, therefore, a situation where there is no doubt that a good cargo was damaged by water while in the hold of the barge. How did this water get in? Was it sea water or rain water? The explanation of respondent must satisfy the court that it was not due to unseaworthiness or negligence.
The barge left Pennsylvania on or about June 25th. She went out to sea at the Delaware breakwater and along the coast tq Providence, arriving there July 1st. She was placed by libelant at the dock as we have seen, and unloading commenced at her stem. Then came the pump incident above referred to.
Warder, the barge master, has this to say on this point: “I discovered as soon as my primer pump got stuek I said to myself I have done it now. I have got my primer full of mud.”
He thereupon says he complained about the lack of water and proceeded to see what ho could do, but it was not for a considerable number of hours and until she had been pulled off somewhat from the dock in deeper water that he was able to get his pump working.
However, when his barge first went to this dock on July 1, he testified he had sounded and that he had found “7 inches of water at each end.” Thus he was well aware of the situation when the after end of the barge was gradually lightened.
This, in my opinion, indicates carelessness on his part. The subsequent failure of his pump rendered the barge unseaworthy.
The unloading continued during July 2 and July 3. On the latter day Mr. Robert Gale, a cargo surveyor and appraiser, representing the insurance companies, and in this sense more interested in reducing the loss, went on board and found water damage. Some of the barrels had water stain 6 to 8 inches from the bottom. If this was salt water from the failure of the pump, I do not see how this helps respondent. In my opinion, the proof reasonably shows that this damage so found was from an additional source.
Moon, a witness for respondent, master of the tugboat Rock which took the barge Hock, with two other barges, from the Delaware breakwater to New York, said, that as they came up the coast “the wind had increased easterly a bit, that created an easte&y sea and then with the water came an easterly swell, which made the barges ‘roll’ from side to side.” He denies that there was any heavy sea or water over the deck of the barges, and confirms that the weather was good-The Hock was a flat bottom barge which Would not roll as much as a round bottom.
Yetra, another witness for respondent,, who was master of the barge Hallowell, one-of the barges accompanying the barge Hock on this trip, said: “The barges rolled a little,just the same as they would in any ordinary good weather coming along up and down the-coast.” During this voyage he sounded his barge, and, in answering to the question, “How frequently?” answered, “I will sound’, her every hour or every two hours. I can’t let her go over two hours without sounding. You don’t want to get too much water into her bilge. If you get too'much water in her-when you get to a rolling sea, if there is any roll at all, a vessel, a wooden vessel especially, will blow her water up through her ceiling, that is why you have to be very particular
Walker, marine superintendent of respondent, testifies: “You can get a wooden-, boat almost tight but it is necessary to pump at intervals to keep the bilges clear. The-depth of the bilge on the Hock is about 14 inches. For the water to rise to get over the-ceiling it would have to be about 18 inches, 14 inches of timber and 4 inches of plank.”'
Brierley, marine surveyor, a witness forlibelant, stated: “There is a certain amount of leakage found in most barges.”
The master of the Hock, on direct, stated--, that before he arrived at the breakwater he sounded the Hock every four hours and found she was making no water. He was then, asked: “Did you pump her during that time ?”" and he replied, “No sir.” He also stated that on the trip from the breakwater the Hock “rolled some but it did not wash me.” However, later in his examination he stated that as-the voyage progressed “of course I would" catch the pumps now and then and suck them dry. I would never let any water be over 9" *631or 10 inches in the bilge. I would pump to get the water down to 7 or 7% inches,” and finally he stated, “if they needed pumping I would pump right immediately. As soon as I get to 8% or 9 inches in pump.”
Thus taking into consideration all the testimony, what was found by Gale on July 3, and the probabilities, it is reasonable to find that this rolling of the barge caused the barge “to blow her water up through the ceiling,” and that this water was not kept down as it should have been by her master. A margin of such a few inches as he allowed might weE be a few more sufficient to readily account for the water damage found on the barrels when she arrived. At any rate this is a failure of proof on the part of respondent.
Warder found on July 1,15 inches aft in his bilge.
“Q. You found 23 inches of water forward in your sounding pipe? A. Yes sir.
“Q. If you had 20 inches of water in your ship let us say forward and aft you would have one inch of water over your ceding ? A. Over the ceiling, yes.
“Q. That is correct isn’t it? A. Yes.”
Warder saw Mr. Gale on board July 3; he saw him and “the boss” together down in the barge.
White, the head stevedore of Ebelant, 15 years’ experience, with a gang of 8 men, worked on the barge July 2 and July 3, until it rained. Was on the boat from 8 to 10 times a day. He says: “The bottom tier of barrels had water stain at least three-quarter to half way up the barrel. Sugar barrels are about 3 feet high. There was about 6 inches difference in the height of the stain on the barrels stowed forward as compared with those stowed aft.”
The other explanation of respondent for the water damage relates to the rainstorms that arose whüe the barge was unloading. The testimony of respondent’s witnesses, which I find to be true, on this branch of the ease is to the effect that while the barge was still being unloaded by the stevedores two rainstorms arose, the rain finaEy becoming so heavy, on each occasion, that the men left the boat. They did this without replacing any of the hatch covers or taking any further care for the cargo.
Warder, her master, protested against such conduct, and was forced to do the work himself with his helpers, of replacing the covers and covering same with the tarpauEns. He and his assistants each got very wet doing so. Thus it appears that Kbelant’s gang worked on the cargo July 2 and 3. They did not work the 4th day of July nor the 5th. On July 6 they started to work at 6 a. m., and they stopped at 11 a. m. Rain had started at 9:30 a. m. They worked in this rain about an hour and one-half. On July 8, they started to work about 6 a. m. It again started to rain at 10:30 a. m., and they stopped work at 11 a. m. This rain was not so hard as that of the former day.
So altogether, therefore, they worked in the rain about an hour and a half on July 6, and for half an hour on July 8.
During this time, with two or possibly three hatches left open to the rain, Warder appears to claim that substantiaEy aE the water found came into the boat.
While I cannot go so far as to find that this claim is weE founded, I do find that some water damage was thus occasioned by Ebelant through no fault of respondent. That such damage can be readüy separated from the other water damage is shown by the witness Gale, who has done this very thing. I do not mean by this that he is correct to the extent of foreclosing further proof before the commissioner, but only that there is plainly shown two causes for water damage. One for which respondent has failed to prove it is not liable; the other being the rain damage for which respondent is not liable.
If this opinion is not considered a sufficient compEanee with the rule 46% of the Admiralty Rules (28 USCA § 723), findings of fact and conclusions of law in accordance herewith may be submitted.
Decree for Ebelant, with costs and usual reference.
On Reargument.
On March 15,1933, this court rendered an opinion wherein it was decided that Ebelant was entitled to a decree.
Thereafter, and before any decree was signed, respondent moved for a reargument of the ease.
On this motion respondent contends, I think correctly, that the court did not attach the importance to the clause in the charter, incorporating the Harter Act §§ 1-3 (46 USCA §§ 190-192), which should have been given it. The Cornelia (D. C.) 15 F.(2d) 245; Warner, etc., Co. v. Munson, etc., Line (D. C.) 23 F.(2d) 194.
There is no necessity for adding to or repeating the previous opinion, except to say that respondent is a private carrier. It chartered its entire barge to Ebelant, which in turn loaded the barge with certain of its mer-, *632ehandise, to wit, ehemieals, at a place in Pennsylvania, and had the barge towed to its plant in Rhode Island, where the libelant also unloaded it. When this merchandise was placed on hoard the barge it was in good order and condition. When it was unloaded at Providence some of it was found damaged by water.
Respondent’s master was in charge of the barge throughout the voyage.
Libelant sought to recover for this damage from respondent on the ground that same was caused by neglect of respondent.
When the barge left Pennsylvania she was seaworthy. The Silvia, 171 U. S. 462, 19 S. Ct. 7, 43 L. Ed. 241; The Glenochil, Prob. Div. 10.
The stowage of the merchandise was solely in charge of libelant.
The barge was discharged at Providence solely by libelant. Some of the merchandise was then found damaged by water.
After the barge had been at her berth for several days and while she was being unloaded by libelant rainstorms arose. The proof therefore shows two distinct causes of damage. One, that caused before the rain and found shortly after discharging commenced; the other, that caused by the rainstorms.
No difficulty is presented in this connection, for the damage from these two causes can easily be and were distinguished in the testimony.
The court found that respondent was not liable, on the proof submitted, for the damage caused from rain, and sees no reason to change that decision.
The real controversy therefore is, What occasioned the water damage discovered after the barge arrived, and before the rain?
Libelant showed satisfactorily that it had deposited, in care of the barge, merchandise in good order, that, when this merchandise was discharged, some of it was found in bad order, due to water. In the case of common carriers the burden would then be shifted, requiring respondent to show how the damage occurred, and that such cause was not due to negligence. Bushey & Sons v. W. E. Hedger & Co. (C. C. A.) 40 F.(2d) 417, and eases cited in the first opinion of the court.
Respondent claims that there is a distinction between the law applicable to a public and private carrier [The Nordhvalen (D. C.) 6 F. (2d) 883 and similar eases], but, however that may be, sufficient was proved here requiring respondent to explain how this merchandise came to be wet.
Respondent blames the presence of any water damage entirely on the rainstorms. Libelant, however, sufficiently showed by the witness Gale, a marine surveyor representing insurance interests, that he had inspected the cargo on July 3, which was prior to any rainstorms. He was asked as follows by proctor for libelant:
“Q. Did you examine the cargo on board the vessel? A. Yes, sir.
“Q. Did you subsequently examine it after it was discharged at the dock? A. Yes, sir.
“Q. What was the condition of the cargo? A. It was wet, stained and caked.”
On cross-examination he was asked:
“Q. Could you walk through the entire hold on July 3rd? A. Yes, sir.
“Q. See the bottom all through? A. Between the stowage, yes.
“Q. And you could see stains upon the barrels down at the bottom? A. Yes, sir.
“Q. All over the boat? A. Yes, sir.
“Q. For the length of the boat? A. Yes, sir.
“Q. And you could see stains on the barrels throughout the entire boat at different, places? A. Yes, sir.”
On redirect he was asked:
“Q. You did, did I understand, go the whole length of the barge in the hold? A. Yes, sir.
“Q. How far was it from where you were on top of the cargo down to the bottom of the hold? A. Well, that would vary because in some sections there was only one tier and others there might be two and possibly three.
“Q. How high were these barrels ? A. Oh I should say about 3 feet or a little more.
“Q. Was there any difficulty whatever in seeing between the barrels down to the bottom of the ship ? A. No, sir.
“Q. How far up on the barrels did you notice the stains to which you have referred? A. 6 to 8 inches.
“Q. What was the discoloration? A. As I remember it, it was a dark muddy color stain.
“Q. When was it that you first noticed damage on the tops of the barrels? A. I think on July 8th.”
This testimony, in the opinion of the court, proved that there had been water damage to the cargo while in the barge and prior to the rain.
At the trial the respondent, in addition to claiming that this testimony was unreliable *633and that the rain had caused all the damage, proved that when the barge arrived at Providence the unloading commenced at her stern, which, in turn, caused her bow to descend somewhat, and that this descent of the bow caused the primer of the barge pump to go into the mud and caused the pump to be temporarily inoperative.
There is no doubt that the barge had to be withdrawn from her berth, this primer cleaned out, and the barge brought back, when discharging continued. There is testimony, from which a fair inference arises, that in the meanwhile water of the bilge had accumulated over the ceiling of the barge.
Por the purpose of this reargument therefore we have the following facts:
The unloading of the barge at Providence was entirely in charge of the libelant. Libel-ant commenced discharging at the stem and caused the bow to descend into the mud. When some of the cargo was- unloaded it was found to have been damaged by water while in the barge. The subsequent rainstorms did not occasion this damage. How then did this water enter the barge to do the damage found?
There is no proof that the barge leaked. In fact the contrary is shown. When I use the word “leak” I do not refer to the ordinary accumulation of bilge water found in barges and kept in cheek by proper use of a pump. The only proven source of the entry of water over the ceiling of the barge, therefore, was this bilge water.
The court suggested a possible opportunity for this bilge water to so arise on the voyage.
The first cause was that proved by respondent, to wit, the tipping of the bow of the barge, due to the commencement of unloading at her stem, with the subsequent clogging of the primer of the pump and the inability of the master to pump until considerably later. The second, as suggested by the court, was the natural rolling of the barge on the voyage to Providence. This cause both libelant and respondent claim is not supported by the evidence, as the voyage was found by the court to be uneventful, without storm, or any proof that water came on the decks of the barge, and, in fact, was possibly a speculation by the court in its search for a second cause.
However, even if the failure of the master of the barge to pump during the voyage was found, this failure, on the evidence in this record, would have been a part of the management of the ship. The Silvia, supra; The Glenochil, supra; The British King (D. C.) 89 F. 872; Sun Co. v. Healy (C. C. A.) 163 F. 48.
Returning therefore to the cause proved by respondent and which it is probable, in view of all the circumstances, did create the situation later found by Gale, the important question raised by respondent, on this argument, appears. Was the failure of the master to pump, due to his carelessness in allowing the primer to become clogged, a part of the management of the barge?
I have already found that the barge was seaworthy, and the record sufficiently shows also that proper steps had been taken by respondent to make her reasonably so. Harter Act § 3 (46 USCA § 192).
On the other hand libelant asserts that the former decision of the court was correct, and relies to a great extent upon The Germanic, 196 U. S. 589, 25 S. Ct. 317, 49 L. Ed. 610.
In The Germanic, supra, it was found that “the loss was due to hurried and imprudent-unloading” (page 595 of 196 U. S., 25 S. Ct. 317, 318), and also “that, after the Germanic was made fast, she was given in charge of the shore agents of the owners, and that they alone assumed direction of the discharging and loading of cargo, and prepared her for the return voyage.” (Page 596 of 196 U. S., 25 S. Ct. 317, 318).
In other words, in The Germanic Case the proximate cause for the damage was the hurry by those unloading the cargo, and this primary purpose or cause brought into effect all the incidental acts.
In the ease before me this unloading of the barge was solely in charge of libelant.
The decision to first take the cargo from the stem of the barge was also that of libel-ant and not of respondent; a method in no way shown to be unusual or extraordinary so as to reasonably call for a protest from the master.
I do not see therefore how respondent can be blamed on such facts where libelant had agreed, in the charter, to always keep the barge “safely afloat.”
It seems to me, as I have carefully examined the authorities cited, and others that could be cited, that the answer to the question of “primary purpose” or “proximate cause,” found by the court, places that cause within or without the protection of the statute.
Thus it has been said: “If the primary purpose is to affect the ballast of the ship, the *634change is management of the vessel; but if, * * * the primary purpose is to get the cargo ashore, the fact that it also affects the trim of the vessel does not make it the less a fault * * “ which the first section removes from the operation of the third. * * * The question which section is to govern must be determined by the primary nature and object of the acts which cause the loss.” The Germanic, supra, 196 U. S. page 598, 25 S. Ct. 317, 318, 49 L. Ed. 610.
Again, in Botany Worsted Mills v. Knott (D. C.) 76 F. 582, where a cargo of wool was damaged by contact with wet sugar, the contact being brought about by allowing the ship to be “down by the head,” this change of trim was found merely incidental, and was not done primarily for the benefit of the ship-, which would have made it a part of her management, but was negligence in earing for the cargo of wool. This case was affirmed. Knott v. Botany Worsted Mills, 179 U. S. 69, 21 S. Ct. 30, 45 L. Ed. 90.
On the other hand, in The Indrani, 177 F. 914 (Circuit Court of Appeals, Second Circuit), the allowing a ship to be down by the head while discharging cargo, and having nothing to do with such discharge, but solely for the purpose of examining her propeller, was found to be a part of the management of the vessel.
If, therefore, this water came into the barge so as to damage the cargo at Providence due to the bow being “tipped,” by reason of this unloading at the stern causing the barge to be “down by the head,” as the direct result of the “primary purpose of those unloading the barge, this was a matter entirely within the control of libelant and done solely at its direction.”
If, however, the water would not even then have arisen over the ceiling of the barge unless the master had been careless in failing to pump, the proximate cause for the entry of the water would then have been this neglect on the part of the master to operate his pump.
The operation of this pump had no connection with the discharge of the cargo. Sun Co. v. Healy, 163 F. 48 (Circuit Court of Appeals, Second Circuit).
While the burden rests upon the respondent to prove that an act of negligence found by the court falls within the exempting statute, Andean Trading Co. v. Pacific, etc., Co. (C. C. A.) 263 F. 559, it seems to me, in this ease, that respondent has duly borne that burden.
Therefore, although libelant has made a prima facie case calling for an explanation, respondent has met this requirement by showing that the cause of the entry of the water doing the damage was this negligence of the master in allowing his pump to get out of order and his subsequent inability to work it, and that such negligence is excused by the statute. If I am correct, my first decision was wrong.
After careful consideration, upon this re-argument I am convinced that the negligence found by me as a basis for the decision in favor of libelant does not impose liability on this respondent, and for that reason respondent is entitled to a decree dismissing the libel,, and my previous decision is set aside.
On Further Keargument.
After filing of the decision, on reargument, June 20, 1933, at the request of counsel for libelant, the court allowed a still further reargument. It is not convinced that its decision is wrong. The principal point with which the court is now concerned is the claim, that there was testimony in the record inconsistent with the following statements by the-court in its decision. “The unloading of the barge at Providence was entirely in charge of the libelant. Libelant commenced discharging at the stern and caused the bow to descend into the mud.” Page 6 [4 F. Supp. 633] of opinion. , “The decision to first take the. cargo from the stem of the barge was also that of libelant and not of respondent, a method in no way shown to be unusual or extraordinary so as to reasonably call for a protest from the master.” Page 9 [4 F. Supp. 633] of opinion.
The inconsistency claimed is, in substance, as follows: That while libelant’s stevedore-commenced unloading the barge at the stem, the master testified that the discharging of the ship was always under his direction; that he had directed that the discharging start in No. 5 hatch; that later he directed them to quit working No. 5, and the work started on No. 4.
From this testimony, libelant argues that the unloading at the stern of the barge was-solely due to the master of the barge, and that therefore libelant is not to be charged' with starting the work at that place.
I have carefully re-examined the record,, and I can find no evidence that justifies me in holding that the master told any particular person in charge of the work where to start.
White, libelant’s witness, who was in charge of the stevedores for libelant, testi*635Bed that he never had any conversation with the master except when the latter complained that his pump was out of order. This according to the master was later in the afternoon, about 3 o’clock. The discharge had started at 11:30 that morning. It was in the afternoon then, after the master found his pump would not work, that he directed that the discharge start on hatch No. 4 rather than on No. 5.
The boss stevedore of libelant was a man of some 15 years’ experience. It seems to me that the confusion arises not from any specific direction by the master to this boss stevedore and his gang, at the commencement of the work, but rather from the experienced stevedore commencing work at the stem of the barge, with the consent and approval .of the master, and that any interference with this work did not occur until later in the day, when the master discovered that his pump was not working.
To be sure the master of the barge was in general charge of the boat, and it is his duty to see that she is not exposed to any undue strain. In my opinion this is all that he means when he testified that the discharging of the barge was always under his direction and that the work started in No. 5 under his authority.
I do not credit his testimony if what he intended is that he specifically talked with the boss stevedore earlier in the day. This is also denied by White.
It therefore comes down to this: That the work done by the master of the barge was simply a part of the management; that libelant commenced work at the stem of the barge for the purpose of unloading; that this work was not interfered with by the master until later in the afternoon when he discovered his pump would not work; that this master, aside from such acts of management, was not concerned with the unloading of the barge, and such acts of management were entirely distinct from the loading, stowage, and discharge of the cargo. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218984/ | JAMES, District Judge.
Plaintiff, being the owner of one class E investment or stock certificate of Western Loan & Building Company, on account of the purchase of which she has paid the sum of $830, brings this suit in equity seeking to have a receiver appointed and to secure a decree dissolving the company named. The respondent corporation is organized under the laws of the state of Utah. Its principal place of business is there located, and its directors there reside. It is asserted in the bill of complaint that the company has many investors in several of the western states, including California. While it is alleged that out of a total of approximately $23,000,000 loaned by respondent .company on real estate in the several states, about $19,000,000 of that sum is loaned or invested in real estate and other property in California, I find no express allegation showing that the company has any property or investment within this judicial district. Passing without further comment the question whether it is shown that a receiver if appointed could find property which he could take possession of in this jurisdiction, there are other matters requiring attention.
The complaint alleges that respondent J. A. Malia, a citizen and resident of the state of Utah, is the duly qualified and acting bank commissioner of the state of Utah, and that as such he has since August 18, 1933, “been the custodian of the head office of the re*636spondent company”; that Malia, on or about the date last mentioned, having ascertained that the company was conducting its business in an unsaf e manner so as to render further transactions by it hazardous to the public and those having funds in its custody, and with the consent of its board of directors, took charge of the company’s office as custodian. This action of the appropriate state official of Utah was in accordance with the law of that state. While there are allegations that the -official named at prior times failed in properly supervising the affairs of the company, there is no allegation that he is not now proceeding to e.are for the interests of investors and creditors in the manner which the law of the state under which respondent corporation was organized provides for. See discussion in Fry v. Charter Oak Life Ins. Co. (C. C.) 31 F. 197, with citations.
The company was licensed to transact business in the state of California, and by so doing submitted itself to the jurisdiction of the building and loan commissioner of California. That official, it was shown at the argument, had, prior to the commencement of this proceeding, taken full charge of all assets in this state for the protection of California creditors and investors. This being true, the court, all other reasons aside, would not appoint a receiver with authority to oust the California commissioner of possession, without his being brought into this proceeding and given an opportunity to be heard. Further, it was stated at the argument, and not denied, that at this time a creditor suit is pending in the United States District Court of the Utah District, wherein the appointment of a receiver is asked for. That suit was brought before the filing of the complaint in this action. If a receiver is to be appointed to administer the company’s affairs, it would be in accord with conventional practice to have the primary receiver named in the district of the residence of the company affected. Ancillary receivers could then be named in all districts where the company has assets, and the business co-ordinated under the central control of the home state. Such is the almost invariable practice. Where the property and business in California is being fully safeguarded by the building and loan commissioner here, there is no extreme emergency warranting action by this court at this time. And, as before stated, the present custodian, who is acting under power given him by the law, has the right to be heard before possession of the assets is taken from him.
The Utah bank commissioner has appeared specially to move to dismiss because of service made on him out of this district. In view of the fact that certain affidavits were presented on his behalf, going to questions of merit in the controversy, I am disposed to hold that he has made a general appearance and that his motion should be denied. It is so ordered. Burnrite Coal Briquette Co. v. Riggs, 274 U. S. 208, 47 S. Ct. 578, 71 L. Ed. 1002; Central Trust Co. v. McGeorge, 151 U. S. 129, 14 S. Ct. 286, 38 L. Ed. 98. The respondent company was duly served through its designated agent in this state and is properly before the court.
The application for the appointment of a receiver pendente lite is denied without prejudice, and the restraining order is dissolved. Leave is given plaintiff to bring in as party defendant the building and loan commissioner of California, and to make service upon him of the bill of complaint and subpoena. The respondent company and respondent J. A. Malia are allowed fifteen days after this date within which to answer the bill of complaint, or otherwise move or plead. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218985/ | ERVIN, District Judge.
This is a suit by the United States against the indemnity company as surety on a bond executed on the 15th day of October, 1929, by R. de Jonge, as master of the Dutch steamship, Waaldyke.
Upon the arrival of the steamship in Mobile on May 26, 1929, the master was notified by the immigration authorities that he should detain a certain seaman on the vessel and not permit him to land. The seaman landed and escaped. A demand was made upon the master for the penalty of $1,-000 for failure to detain the seaman on the steamer. The steamer was desirous of sailing before the final determination of liability and asked leave to clear the vessel, and was informed that he could clear only by paying $1,000 to the Collector of Customs or by making a bond, and the master elected to make the bond, which was then prepared by the Collector of Customs at Mobile. When the bond was presented to the master he filed a protest in the following words: “You will please take notice that the undersigned, Rudolph de Jonge, as Master of the S. S. Waaldyke, as principal in a bond made by him to the United States of America, of even date herewith and executed contemporaneously herewith, does hereby protest against the phrase, ‘as liquidated damages’ used twice in said bond; and also separately protest against the expression ‘has become liable,’ preceding the clause, ‘to a penalty of One Thousand Dollars ($1,000.00),’ and also to the expression, ‘after due notice to detain such alien member or members,’ because and insofar as said expressions tend to constitute an admission that the said Master or vessel has become liable to a penalty, and that ‘due notice’ to detain was given, both of which are actually not admitted and are hereby denied, and said protestant hereby claims that due notice was not given to detain such alien member or members and that no liability was incurred by said Master or said ship; and also separately protests against said bond being made payable to the Collector of Customs at New Orleans, La., instead of at Mobile, Alabama, and further protests against the requirement of the Collector of Customs at Mobile that the said bond be signed in the form in which it is being signed and which is the only form in which said Collector of Customs at Mobile would permit it to be signed, which said signing is only being made subject to the aforesaid protest, and in order that clearance of the said vessel may be grant-, ed.”
The plaintiff sues on the bond which it copies, and avers a failure to pay the amount of it and that this amount of $1,000 was finally determined by the Commissioner General of Immigration.
The defendant’s plea raises the question that under the law the Commissioner General of Immigration has no power to assess or pass upon any fine, and that the Secretary of Labor or his assistants are the only ones authorized to hear the matter and impose a fine, and he also attaches to his plea a copy of the protest signed by the master at the time he executed the bond. The pleas are demurred to because they present no defense to the action and because they show no facts constituting a legal defense.
There are many other grounds alleged, but these are sufficient to raise the question I feel necessary to pass on.
The question arises under section 167 (a), chapter 6, title 8 USCA. This section provides that the master of any vessel arriving in the United States from a foreign port who fails to detain on board any alien seaman employed on such vessel until after inspection, or who fails to detain such seaman on board *638after such inspection, or to deport such seaman if required by the immigration officer or Secretary of Labor, “shall pay to the collector of customs of the customs district in which the port of arrival is located the sum of $1,000 for each alien seaman in respect to whom such failure occurs. No vessel shall be granted clearance pending the determination of the liability to the payment of such fine, or while the fine remains unpaid, except that clearance may be granted prior to the determination of such question upon the deposit of a sum sufficient to cover such fine, or of a bond with sufficient surety to secure the payment thereof approved by the collector of customs.”
It will be noticed in the first place that a bond may be given pending determination of liability, but not after the determination of liability.
It also will be observed that such bond is to be approved by the Collector of Customs who does not belong to the Department of Labor but does belong to the Treasury Department. Also that the fine shall be paid to the Collector of Customs, though it is to be imposed by some officer in the Department of Labor, because it is the immigration officer at the port of arrival who is to inspect the seaman, and either such immigration officer or the Secretary of Labor who shall notify the master that such seaman shall be detained on the vessel or deported by the ship.
We see here much confusion between the duties of the two departments in reference to the vessel, the master, and the seaman. We also see when we come to a bond provided for by section 167 (a) that the only thing said about the bond is that it must be a bond with sufficient security to be approved by the Collector of Customs. There is no form of bond given, and no data except the requirements of the section as to the duties of the master and in reference to the alien seaman and the amount of the fine which may be imposed. Nothing is said either about who is to impose the fine or how it shall be imposed or on what notice.
It is objected to the bond of the defendant, that the law requires all fines to be imposed by either the Secretary of Labor or one of the assistant secretaries of labor, and other provisions of the immigration law which provide for fines for other offenses are cited to show this.
The fact that the Secretary of Labor is required to assess fines for other offenses, and the ruling of courts on that duty, does not cover this case.
Here the statute is silent as to who shall impose the fine.
We know that the Collector of Customs has authority to impose administrative fines on vessels and masters for violation of many of our laws regulating vessels coming into our ports.
Here the statute says: “No vessel shall be granted clearance pending the determination of the liability to the payment of such fine.”
The bond stated such determination was to be made by the Commissioner General. It was evidently contemplated that a speedy determination was to be had, but no rules were declared and even no notice provided for.
The officers were left to determine the form of the bond and who was to determine if a fine was to be paid. I think it would be going entirely too far to hold that their decision on this question, so left open, would make the bond absolutely void.
Permission to make the bond was asked by the master, so I can see no duress on him in requiring him to sign it. The feature providing for determination of liability by the Commissioner General was not protested, so I cannot see where he was required to do something illegal as a condition of being permitted to clear.
How could the requirement of a bond be duress on the captain when it was prepared at his request?
If it was not duress on the principal, it was not duress on the surety.
It is said, however, the objection now urged is not to the signing of a bond, but to illegal provisions contained in the bond.
The protest then made pointed out the objections then made, and this is not one of them.
The present objection is not to the imposition of the fine, as not being justified by the facts, but that the official who imposed it had no authority to do so.
There is no question that the vessel, brought the seaman, that notification was given that he must be detained, that he was not detained but escaped from the vessel. So that every fact provided in this section authorizing imposition of the fine is shown, including the making of the bond and its signing by the surety. But the defendant seeks to escape liability by setting up want of authority in the Commissioner General of Immigration on the question of whether or not the *639fine should be imposed. Looking to a provision found in the same title of section 101 of title 8, chapter 6, which provides for creation of the office of the Commissioner General of Immigration and his appointment, and section 102 which provides for his authority, we cite the latter section, stating: “The Commissioner General of Immigration under the direction of the Secretary of Labor shall have charge of the administration of all laws relating to the immigration of aliens into the United States, and shall have the control, direction, and supervision of all officers, clerks, and employees appointed thereunder.”
Under this authority I am inclined to hold that the Commissioner General as well as the Secretary of Labor had authority to impose the fine.
It is contended that subdivisions (b) and (c) of section 167 show that only the Secretary of Labor could impose the fine.
(b) shows that a hearing was to be had by providing that proof that if the seaman’s name did not appear on the outgoing manifest, or that he was reported by the master as a deserter would malte a prima facie ease.
(c) provides that if the Secretary of Labor finds it would be an undue hardship on the seaman to deport him on the vessel he arrived on, he might authorize it on some other vessel. This has nothing to do with the fine on the master for not detaining him, but only applies to the deportation of the seaman.
This is one of the administrative fines authorized by the law, and the same strictness is not required as to authority as in matters of judicial action.
Had the bond only required the captain to pay such fine as might be imposed without naming the official who was to impose it, the question might be raised.
We have here an indefinite statute simply requiring the doing of certain things but not specifying how they were to do them, and in the question presented, who was to decide it.
The officers were left in the emergency to determine for themselves the questions as they arose.
Under these circumstances I feel that every presumption in their favor should be indulged. The same strictness -should not be indulged as in judicial proceedings. United States v. Bradley, 10 Pet. 363, 9 L. Ed. 448.
The further question arises whether or not under the facts shown by this record the defendant insurance company or the captain of the boat could raise the question.
We find the master had committed an offense which rendered him liable to a fine, but both the vessel and the master were seeking the accommodation of having a permit to leave. Shortly before the final determination of the imposition of the fine was entered, permission to execute a bond was granted. The bond was prepared and presented to the master who protested certain recitals in the bond, but no protest was made of the fact that the bond provided for determination of the question of whether or not a fine should be imposed by the Commissioner General instead of the Secretary of Labor. Conceding that if the bond was void the surety could raise the question as well as the principal, still if the principal were estopped then the surety would be, and under these facts it seems to me the principal was estopped because the bond was made at his request and for his accommodation, and no protest raising this question was made by him. He being estopped, the surety is also estopped. United States v. National Surety Co. (D. C.) 20 F.(2d) 972.
An order will be entered sustaining the demurrers to the plea. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218986/ | NORCROSS, District Judge.
Complainant by its bill of complaint prays that defendants be enjoined from further removing, detaining, and/or sequestering merchandise of complainant in the bill of complaint specifically described, and that they be directed mandatorily to forthwith release from their custody and redeliver to complainant all such merchandise in their possession. To the bill of complaint defendants interposed a motion to dismiss upon the grounds that the complaint does not state facts sufficient to constitute a cause of aetion in equity in favor of complainant or against defendants or within the jurisdiction of this court; that if a suit or aetion may be brought on the facts alleged the Secretary of the Treasury and the Commissioner of Customs are necessary parties.
It is alleged in the bill of complaint that complainant is engaged in the business of importing from Japan and other oriental countries various kinds of polishing, dusting, and mop cloths, and also rag and paper stock used chiefly for paper making, and also wiping rags; such merchandise being packed in bales of approximately 500 pounds each. That on February 25, March 6, and March 16, 1933, three several shipments totaling 630 bales were received by complainant at the Port of San Francisco upon which complainant paid the fuE duty assessed by the collector of customs against said merchandise, and in aU respects fully complied with the requirements of the Tariff Act of 1930. That at the time of instituting the suit an additional one hundred and eighteen bales from a later shipment were on the dock at San Francisco. That at the time last-mentioned defendants already had in their possession thirty bales, of which many are dupHcates, containing merchandise identically the same in character, quality, and quantity. That defendants have threatened to and will sequester and detain one bale of each mark, as in the complaint described, and continue to detain increasingly large quantities of complainant’s merchandise, all being identical in character. These acts and threatened acts of a similar character are alleged to be without authority of law and to the serious injury of complainant.
Under date of January 11, 1933, the Bureau of Customs of the Treasury Department issued and promulgated a rule or regulation providing among other things as follows: “In the designation of examination, packages from importations of ‘Japanese wipers’, the coEeetor shaE designate one bale of each mark or grade in addition to the usual 10*%, the extra- bale to be delivered to the appraiser’s stores under cord and seal, to be held by the appraiser -for use as samples for presentation to the Custom Court in the event a protest is filed against the decision of the coEeetor with respect to their classification. When the collector is satisfied that no protest will be filed, the sample bales may be released to the importer. The liquidations of entries covering importations of cotton rags of which full bales are being held as samples should be expedited by collectors -and eomptroEers, in order to eliminate any undue delay in the release of such bales if no protest is filed.”
It is not seriously contended that the detention of the bales of merchandise as alleged in the bill of complaint was not in pursuance of the provisions of the regulation referred to, but it is contended by complainant that the regulation is void as in excess of the powers of the Secretary of the Treasury. Power is conferred on the secretary to prescribe rules and regulations. 19 USCA § 66. Section 499 of the Tariff Act of 1930 (19 USCA § 1499) provides: “Imported merchandise, required by law or regulations made in pursuance thereof to be inspected, examined, or appraised, shall not be dehvered from customs custody, except as otherwise provided in this chapter, until it has been inspected, examined or appraised and is reported by the appraiser to have been truly and correctly invoiced and f ound to comply with the requirements of the laws of the United States. The collector shall designate the packages or quantities covered by any invoice or entry which are to be opened and examined for the purpose of appraisement or otherudse and shall order such packages or quantities to be sent to the public stores or other places for such purpose. Not less than one package of every invoice and not less than one package of every ten packages of merchandise, shaE be so designated unless the Secretary of the Treasury, from the character and description of the merchandise, if of the opinion that the examination of a less proportion of packages wiE amply protect the revenue and by special regulation permit a less number of packages to be examined. The collector or the Appraiser may require such additional packages or quantities as either of them may deem necessary.” (Italics supplied.)
*644Construing the statute and the regulation together they do not appear to he in conflict. Commissioner v. Van Vorst (C. C. A.) 59 F. (2d) 677, 679.
We are also of opinion that complainant's remedy is not in this court, but is by protest and review of decision thereon by the United States Customs Court (19 USCA § 1515), from the decision of which appeal lies to the Court of Customs and Patent Appeals, and finally to the Supreme Court. 28 USCA § 308.
Having reached the conclusion that this court is without jurisdiction to consider and determine questions of the character presented in the bill of complaint, it is unnecessary to determine the further question, raised by the motion to dismiss, whether the Secretary of the Treasury and Commissioner of Customs otherwise would be necessary parties. In this connection, however, reference may be made to the recent decision of the Circuit Court of Appeals of this circuit in Moody v. Johnston, 66 F.(2d) 999.
For the reasons stated, it is ordered that the motion to dismiss be, and the same hereby is, granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218987/ | KNIGHT, District Judge.
This is a motion to strike out certain portions of the answer.
Plaintiff is the owner of certain patents covering methods, processes, machines, and attachments for manufacturing baskets commonly used for fruit packing. In or about April, 1930, the plaintiff entered'into a license agreement with the defendant, whereby it licensed and leased to the defendant such patented machines and attachments and the right to manufacture baskets by the use thereof. The defendant agreed to conform to the terms of the lease, to pay certain royalties on baskets sold and rental on the machines and attachments. Defendant, licensee, admitted the validity of the patents, and plaintiff, licensor, agreed to use due diligence in prosecuting infringers thereof. The defendant, licensee, also agreed not to sell any of the baskets manufactured under, the licenses for less than the market price thereof “and on sueh terms and conditions as licensor may from time to time decide are just and equitable.”
This action is brought to recover royalties alleged to be due and unpaid for the years 1930 and 1931, and also to recover on another alleged cause of action not involved in this motion.
The answer, as an affirmative defense, sets up the failure of the plaintiffs to use due diligence in prosecuting infringers as covenanted in the license agreement. As an affirmative defense and counterclaim, the answer sets up the failure of the plaintiff to prosecute infringers, and also that the defendant has suffered special damages in the sum of $10,000 on account thereof. As another and separate affirmative defense, the defendant answers that the alleged cause of action herein for royalties is in restraint of trade, illegal, and void. The plaintiff has replied, denying any liability on account of the counterclaim.
Plaintiff moves to strike out all of the so-termed affirmative defenses and defense and counterclaim aforesaid on the ground that the matters therein set forth do not state á defense. This motion being made on the pleadings, the matters pleaded stand admitted as pleaded, and the pleadings are to be construed most favorably to the pleader. Calvin A. Lamb v. S. Cheney & Son, 227 N. Y. 418, 125 N. E. 817. It does not follow, however, that conclusions of law as set forth in the pleading are admitted. Equitable Life Assurance Society of U. S. v. Brown, 213 U. S. 25, 29 S. Ct. 404, 53 L. Ed. 682. A question of law is the matter to be determined on this motion.
The gravamen of the first defense herein mentioned (paragraphs 5-12) is the loss of the right of the plaintiff to prosecute infringers by reasons of its laches. The motion as to this defense must be granted. It does not state a defense in law. It contains no allegation that the defendant has suffered any loss on account of the plaintiff’s laches. It is not alleged that any baskets manufactured by any one other than defendant were marketed. It is not made to appear that laches resulted prior to the production on account of which royalties are claimed. Assuming the covenant against infringers and the covenant to pay royalties were mutual covenants and interdependent, mere proof of failure to prosecute infringers would not suffice. Damage is not to be presumed, and must be alleged and proved. In the ease of a nonexclusive license, where defendant has enjoyed, without interference so far as the pleading shows, benefits under the license agreement, he cannot refuse to pay the agreed price therefor on the ground that the right to protect him in future benefits has been lost. He may never suffer any loss. He may elect to continue to act under the license to the end. It would certainly be inequitable to say that he could do this and yet pay nothing for these benefits, even though Ms rights had in no way been lessened by infringement by others, Farnsworth v. Boro Oil & Gas Co., 216 N. Y. 40, 109 N. E. 860 ; Heller & Son, Inc., v. Lassner Co., 214 App. Div. 315, 212 N. Y. *646S. 175; Stott v. Rutherford, 92 U. S. 107, 28 L. Ed. 486; Barber Asphalt Paving Co. v. Headley Good Roads Co. (D. C.) 284 F. 177; Hein v. Westinghouse Air Brake Co. (C. C.) 172 F. 524, 525; Gibbs v. McNeeley (C. C.) 102 F. 594; Jack v. Armour & Co. (C. C. A.) 291 F. 741. The case of Rosenthal Paper Co. v. National Folding B. & P. Co., 226 N. Y. 313, 123 N. E. 766, quoted at length by defendant, concerned an exclusive license. While it was said that the agreement to pay royalties and the agreement to protect against infringement were interdependent, the verdict for the plaintiff, assignee of assignee of inventor, for royalties was sustained on the ground that the defendant, “Having kept alive the contract and secured the results, it can not maintain that it is not subject to its obligations and liabilities, for the reason that Seligstein (assignor) had renounced it. Its remedy is the recovery, in counterclaim or action, of the damages, if any,” caused. For these reasons the motion as to this pleading is granted.
The motion to strike out the affirmative defense and counterclaim set forth in the answer (paragraphs 13-22) must be denied. In addition to the allegations set forth in the affirmative defense hereinbefore considered, this defense contains the allegation's that the defendant has sustained damages in a definite amount, and that this has resulted through loss of business caused by infringers. The substance of the allegations in this defense is that the plaintiff represented that it had the right to license the machines and attachments in question, that the defendant relied on this representation, that this particular type of basket has been manufactured without license from the plaintiff and that these patents have been infringed, that the plaintiff had knowledge of such infringement and has failed to prosecute the infringers with due diligence, and that, as a result thereof, the defendant has suffered certain' damages. It is true that this license agreement is nonexclusive. Proof of damages may be difficult, but the measure of such difficulty has no bearing on the sufficiency of the pleading.
The allegations of infringement and laches create questions of fact. “The length of time during which the party neglects the assertion of his rights which must pass in order to show laches varies with the peculiar circumstances of each case.” Halstead v. Grinnan, 152 U. S. 412, 14 S. Ct. 641, 643, 38 L. Ed. 495. Knowledge of the infringement is a question of fact to be determined on the trial. Foster v. Mansfield, Coldwater, etc., R. Co., 146 U. S. 88, 13 S. Ct. 28, 36 L. Ed. 899; Smith Hardware Co. v. S. H. Pomeroy Co. (C. C. A.) 299 F. 544. Delay in prosecuting infringers while an action for infringement is pending may make a question of fact. Steams-Roger Manufacturing Co. v. Brown (C. C. A.) 114 F. 939. As stated by plaintiff in its brief, “The contract requires plaintiff to use due diligence, and this, we conceive, implies reasonable diligence which is a relative term and depends upon the facts and circumstances.” Wilfley v. New Standard Concentrator Co. (C. C. A.) 164 F. 421, Victory Bottle Capping Mach. Co. v. O. & J. Mach. Co. (C. C. A.) 280 F. 753, and Menendez v. Holt, 128 U. S. 514, 9 S. Ct. 143, 32 L. Ed. 526, disclose comparable facts determined on the trial.
In approaching consideration of the defense (paragraphs 23-32) that the license agreement is in restraint of trade and void, we may well first set forth certain propositions that either are agreed on by the parties or about which there can be little serious doubt under the authorities.
1. Both the law of the United States and the law of the state in which it is shown the violation occurred apply in determining the validity of the agreement. Locker v. American Tobacco Co., 121 App. Div. 449, 106 N. Y. S. 115, affirmed 195 N. Y. 565, 88 N. E. 289; Burrows v. Interborough Metropolitan Co. (C. C.) 156 F. 389. This court has power to enforce state laws prohibiting combination in restraint of trade. Waters-Pierce Oil Co. v. Texas, 212 U. S. 86, 29 S. Ct. 220, 53 L. Ed. 417; Binderup v. Pathe Exchange, Inc., 263 U. S. 291, 44 S. Ct. 96, 68 L. Ed. 308.
2. The terms of the agreement and not whether there has been any actual operation under it determine whether it is one in restraint of trade and stamp its legality or illegality. Cummings v. Union Blue Stone Co., 164 N. Y. 401, 58 N. E. 525, 52 L. R. A. 262, 79 Am. St. Rep. 655; Cohen v. Berlin & Jones Envelope Co., 166 N. Y. 292, 59 N. E. 906; United States v. Trenton Potteries Co., 273 U. S. 392, 47 S. Ct. 377, 71 L. Ed. 700, 50 A. L. R. 989.
3. The patentee, plaintiff, had the right to fix the price at which the licensee may sell the baskets in question made by the patented machinery. The law is the same as though the patentee were vendor and the licensee a vendee. Bement & Sons v. National Harrow Co., 186 U. S. 70, 22 S. Ct. 747, 46 L. Ed. *6471058; United States v. General Electric Co., 272 U. S. 476, 47 S. Ct. 192, 71 L. Ed. 362.
4. Even though the defendant was a party to an illegal agreement, illegality may be set up as a defense. Bement & Sons v. National Harrow Co., 186 U. S. 70, 22 S. Ct. 747, 46 L. Ed. 1058; Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U. S. 227, 29 S. Ct. 280, 53 L. Ed. 486; Sherman Anti-Trust Act, § 1 (15 USCA § 1).
The answer alleges the making of the license agreement, and a copy thereof is therein included. It alleges that the plaintiff established the sales prices of the baskets and, as a part of its plan therefor, issued bulletins containing a schedule of priees, terms and conditions controlling sales, and that it also issued proposed agreements to be entered into between the defendant and authorized dealers specifically named. Copies of the bulletins of priees, terms, and eonditiqns and the proposed dealer’s contract are also included as part of the answer.
The license agreement itself contains no provision fixing specific priees at which the baskets might be sold. It does, however, provide that the licensee shall not sell at less than “fair market price and on such terms and conditions as licensor may, from time to time, decide are just and equitable.” The defendant claims that the bulletin of prices aforesaid was issued pursuant to that provision. The bulletin reads in part that “subject to change without notice by licensor the following are hereby fixed as the fair market price of baskets, the terms and conditions upon which they may be sold by the licensee, under the terms of paragraph 24 of the attachment license contract” under the patents in question. The bulletin contains a list of sales priees for practically every state in the Union. It recites that “the fair market priees are minimum prices. Sales may be made at higher priees.” It also defines “authorized dealers,” and provides for a special discount of 7 per cent, to authorized dealers in addition to the general discount of 2 per cent, for cash in 15 days. Authorized dealers are defined as follows: “An authorised dealer in baskets is' one who has executed and has not violated the Authorised Dealers’ contract; * * * nor sold any of said baskets at less than the fair market prices as established therefor, as herein provided, and who is a person, firm, or corporation, with an established place of business who buys baskets from a basket manufacturer for the purpose of selling same, and does sell same at not less than the established fair market price to anyone growing, packing and/or marketing fruits or vegetables.”
Taking the license agreement, bulletins, and authorized dealer’s contract together as binding upon the parties to this action, the indisputable fact is that the licensor controls the priees at which the baskets are to be sold both by the licensee and the authorized dealer.
The plaintiff contends that such proposed authorized dealer contract is collateral and has no effect on the legality of the instrument signed by the parties. If this view is sustained, the motion would necessarily have to be granted. The answer in effect asserts that the license contract includes these bulletins, and that in pursuance thereof the plaintiff did establish sales priees for baskets to authorized dealers. While the specific question of collateral agreement was not considered in Boston Store v. American Graphophone Co., 246 U. S. 8, 38 S. Ct. 257, 258, 62 L. Ed. 551, Ann. Cas. 1918C, 447, the contract therein contained a provision that the plaintiff agreed “to adhere strictly and be bound by the official list prices established from time to time by said company,” and that the graphophones were sold “subject to conditions and restrictions as to the persons to whom and the price at which they may be resold.” Priees fixed subsequent to the agreement were in effect held to be part of the contract. .While the “Authorised Dealers” contract is collateral in the sense that it creates a liability purporting to bind parties irrespective of the license agreement, nevertheless it is an agreement which is made in pursuance of the license agreement, and is not independent of such latter agreement. By connection it is made part of or is the terms and conditions referred to in the license agreement. The cases cited by the plaintiff are not in point here. Each of these was an action to recover the purchase price of goods claimed to have been sold by one engaged in an illegal combination. The contracts of purchase were independent of any combination, and these cases hold that “It is only where the invalidity is inherent in the contract that the Act (Anti Trust Act) may be interposed as a defense.” The authorized dealer could recover on the sale of baskets. The licensee could not recover from the authorized dealer. Accepting the terms of the authorized dealer’s contract, the authorized dealer could not recover against the licensor or licensee on a contract held to be in restraint of trade. The Sherman Anti-Trust Act, § 1 (15 USCA § 1), and the so-called Donnelly Act, N. Y., *648section 340, General Business Law (Consol. Laws, c. 20), declare illegal the agreement restraining competition, and not the agreement for the sale by the dealer. Schnaier Contracting Corp. v. International Tailoring Co., 119 Misc. 573, 197 N. Y. S. 646; Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 22 S. Ct. 431, 46 L. Ed. 679.
It is contended that the licensee is a “qualified licensee,” that the licensee may be considered as “sales agent,” and also that the authorized dealer is in effect an agent. The only sense in which the licensee is a qualified licensee is in the sense that his rights are limited in the sale of baskets by the agreement. That, however, in no way exonerates him from liability as a principal under the license agreement. Were the licensee construed in law to be the agent of the licensor, the licensor could not legally through the licensee make an agreement fixing the prices for sales by the authorized dealer. Bement & Sons v. National Harrow Co., 186 U. S. 70, 22 S. Ct. 747, 46 L. Ed. 1058; United States v. General Electric Co., 272 U. S. 476, 47 S. Ct. 192, 196, 71 L. Ed. 362, cited by plaintiff, on the matter of agency, are authorities only "for the proposition that “The owner of an article patented or otherwise is not violating the common law or the Anti-Trust Act by seeking to dispose of his articles directly to the consumer and fixing the price by which his agents transfer the title from him directly to such consumer.” So here the licensee as agent could legally fix the price to the authorized dealer, but he could not go further.
Plaintiff seeks the construction that the “authorized dealer” is an agent of the licensee. I can see no basis for such construction. The bulletins and the authorized dealer’s contract specifically describe such authorized dealer as a purchaser. The contract in its entirety contemplates an absolute dealer as one who “buys baskets from a basket manufacturer, for the purpose of selling same.” The dealer’s contract contains a repetition of this definition, and in addition these significant and conclusive clauses, “The licensee agrees to sell to the authorized dealer, and the authorized dealer agrees to prosecute diligently the sale of said baskets,” and further, “The authorized dealer will give the licensee a written order in duplicate for all baskets purchased.”
The Sherman Anti-Trust Act, § 1 (15 USCA § 1), provides: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States * * * is declared to be illegal.” The General Business Law of the State of New York, section 340, also provides: “Every contract, agreement, arrangement or combination whereby a monopoly in the ' * * * sale * ' * * of any article * * * used in the conduct of trade * * * is or may be created * * * is hereby declared to be against public policy, illegal and void.”
Under authority of the Constitution statutes have been enacted to protect the patentee and his invention. It has long been recognized that such legislation is necessary to encourage “useful invention and promoting new and useful improvements by the protection and stimulation thereby given by inventive genius.” Inventors by virtue of patents have what is rightly termed a “monopoly” in the patented article. The patentee may sell his patented article or he may withhold its sale by virtue of this monopoly. He may restrict the terms upon which the article may he used and fix the price at which the licensee may sell. The patent laws and these antimonopoly laws are not conflicting but are mutually exclusive of each other. Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U. S. 227, 29 S. Ct. 280, 53 L. Ed. 486.
As I read the long line of opinions in the Supreme Court, that court has consistently held that, where a patentee has licensed the use of his patent, he cannot by agreement reserve the right to fix the price at which a purchaser from the licensee may sell. It seems to me necessary only to point attention to a few of the eases containing such opinions. Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 33 S. Ct. 9, 57 L. Ed. 107; Bobbs-Merrill Co. v. Straus, 210 U. S. 339, 28 S. Ct. 722, 52 L. Ed. 1086; Dr. Males Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502; Bauer & Cie v. O’Donnell, 229 U. S. 1, 33 S. Ct. 616, 57 L. Ed. 1041, 50 L. R. A. (N. S.) 1185, Ann. Cas. 1915A, 150; Straus v. Victor Talking Machine Co., 243 U. S. 490, 37 S. Ct. 412, 61 L. Ed. 866, L. R. A. 1917E, 1196, Ann. Cas. 1918A, 955; Boston Store v. American Graphophone Co., 246 U. S. 8, 38 S. Ct. 257, 62 L. Ed. 551, Ann. Cas. 1918C, 447; Carbice Corp. v. American Patents Dev. Corp., 283 U. S. 27, 51 S. Ct. 334, 75 L. Ed. 819; vide also Walker on Patents (6th Ed.) vol. 1, § 365 et seq., and eases cited. Certain of these eases involve the sale of patented articles. Others involve restrictions in the use of patented articles. The Sale contemplated under this agreement is the sale of unpatented products of a patented ma*649chine. The conclusion to be drawn from these eases in the view of the court is that there is no distinction to be made after the license to manufacture had been given.. In other words, the thing the licensee could not do, the licensor could not do. As was said in Carbice Corp. v. American Patents Dev. Corp., 283 U. S. 27, 51 S. Ct. 334, 335, 75 L. Ed. 819: “The attempt to limit the licensee * * * is comparable to the attempt of a patentee to fix the price at which the patented article may be resold.” In Bement & Sons v. National Harrow Co., 186 U. S. 70, 22 S. Ct. 747, 46 L. Ed. 1058, and United States v. General Electric Co., 272 U. S. 476, 47 S. Ct. 192, 71 L. Ed. 362, there is nothing in conflict with the view herein expressed. The holding in the latter case on this point may be summed up in the statement that the owner of a patent has the absolute freedom in the use or sale of rights under his patent. Distinction from the case at bar is apparent. In United States v. General Electric Co., 272 U. S. 476, 47 S. Ct. 192, 196, 71 L. Ed. 362, the facts axe in no way parallel to those present here. There sales were held to have been made directly by the patentee through agents. After discussing Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 31 S. Ct. 376, 55 L. Ed. 502, Boston Store v. American Graphophone Co., 246 U. S. 8, 38 S. Ct. 257, 62 L. Ed. 551, Ann. Cas. 1918C, 447, and Standard Sanitary Mfg. Co. v. United States, 226 U. S. 20, 33 S. Ct. 9, 57 L. Ed. 107, and pointing out that in these cases the purchasers of the patented article became complete owners, the court said: “We axe of opinion, therefore, that there is nothing ® * * which- requires us to hold that genuine contracts of agency like those before us, * * * axe violations of the Anti-Trust Act. The owner of an article, patented or otherwise, is not violating the common law, or the Anti-Trust law, by seeking to dispose of his article directly to the consumer and fixing the price by which his agents transfer the title from him directly to sueh consumer.” (My italics.) In discussing the fixing of the price at which a licensee shall sell, the court also said: “That the decisions of this court holding restrictions as to price of patented articles invalid apply * * * really are only instances of the application of the principle ® ® * that a patentee may not attach to the article made by him or with his consent a condition running with the article in the hands of purchasers limiting the price at which one who becomes its owner for full .consideration shall part, with it.” (My italics.) The plaintiff cites Appalachian Coals, Inc., v. United States, 288 U. S. 344, 53 S. Ct. 471, 77 L. Ed. 825; United States v. Colgate & Co., 250 U. S. 300, 39 S. Ct. 465, 468, 63 L. Ed. 992, 7 A. L. R. 443. The Appalachian Case involved a combination of a group of producers, and it was held in effect that the combination sought to effect economies and not to effect domination of prices. The Colgate Case involved the sufficiency of an indictment. This language from the opinion reveals that it does not support plaintiff’s view: “And we must conclude that, as interpreted below, the indictment does not charge Colgate & Co. with selling its products to dealers under agreements which obligated the latter not to resell except at prices fixed by the company.”
Another contention made by the plaintiff is that there is no allegation in the answer that the defendant entered into any “Authorized Dealers” contract with dealers. Sueh an allegation is unnecessary, if the agreement is illegal and such illegality is set up in the answer. Bement & Sons v. National Harrow Co., 186 U. S. 70, 22 S. Ct. 747, 46 L. Ed. 1058; Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U. S. 227, 29 S. Ct. 280, 53 L. Ed. 486; Sherman Anti-Trust Law, § 1 (15 USCA § 1). “The scope of the contract, and not the possible self-restraint of the parties to it, is the test of its validity.” Cummings v. Union Blue Stone Co., 164 N. Y. 401, 58 N. E. 525, 526, 52 L. R. A. 262, 79 Am. St. Rep. 655; United States v. Trenton Potteries Co., 273 U. S. 392, 47 S. Ct. 377, 71 L. Ed. 700, 50 A. L. R. 989.
In accordance with the authorities hereinbefore cited and the views hereinbefore expressed, the motion as to this defense must be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218988/ | AVIS, District Judge.
The plaintiff brought suit against the defendant to recover claimed overpayments of income and excess profits tax for the year 1917.
The parties, by stipulation duly filed, have waived a trial by jury, and submitted the case to the court without the intervention of a ju*y-
The facts have been submitted by stipulation and deposition, which show, generally, that the plaintiff, Blackwood Coal & Coke Company, Blackwood Land Company, Roaring Fork Railroad Company, Pardee .Company, and Chestine Land Corporation, each submitted for the year 1917 tax returns upon which the plaintiff paid to the defendant $577,516.92; and Blackwood Coal & Coke Company and Roaring Fork Railroad Company, filing a consolidated return, paid to the defendant $57,780.40, a total of $635,297.32.
’ The returns of the other corporations named did not-show any tax due and owing, but subsequently the Blackwood Land Company was required by the collector to pay a tax of $1,604.28, together with $773.21 interest, a total of $2,377.49.
After these payments had been made, and in the year 1921, before the enactment of the 1921 Revenue Act, the Commissioner of Internal Revenue ruled that the aforesaid corporations were affiliated during the year 1917, to such an extent as to require them to file a consolidated return, and to pay taxes in accordance therewith.
The various corporations thereupon filed a consolidated return, which showed a tax liability for the year 1917 of $473,112.18.
After the filing of the consolidated return, and the aforesaid corporations had signed the agreement of approval, claim for refund was duly filed, and subsequently, before the claim for refund was rejected, the Bureau of Internal Revenue reversed its ruling, and declared said corporations not affiliated during the year 1917, and consequently not entitled to file a consolidated return. The claim for refund was ultimately rejected, and this suit brought.
The amount claimed by the plaintiff in this suit is the difference between $635,297.32, actually paid, and the amount claimed as tax liability, under the consolidated return, to wit, $473,112.18, or the sum of $162,185.14, with interest from June 14, 1918, and, in addition, the sum paid by Blackwood Land Company, $2,377,49, with interest from April 13, 1929.
The ownership of the stock of the aforesaid corporations was, in 1917, as follows:
Briefs of all counsel, discussing fully tlie issues of fact and law, have been submitted and carefully read.
However, the only matter involved appears to be questions of law as applied to the admitted facts, and which have herein been briefly stated.
While counsel for the plaintiff complain as to the action of the Commissioner- in re*651versing Ms decision, when it was found that the amount paid under the original returns was in excess of tax liability shown by the consolidated return, no legal argument is based upon tMs action, and apparently such contention would be ineffective.
Counsel for the plaintiff base its right to recover on the regulations of the Commissioner, under the Revenue Act of 1917, and the application of the statute of 1921 to taxes for 1917.
The applicable part of the regulations in question, known as Article 77 of Treasury Regulations 41, reads as follows: “For the purpose of this regulation two or more corporations will be deemed to be affiliated (1) when one such corporation owns directly or controls through closely affiliated interests or by a nominee or nominees, all or substantially all of the stock of the other or others, or when substantially all of the stock of two or more corporations is owned by the same individual or partnersMp, and both or all of such corporations are engaged in the same or a closely related business; or (2) when one such corporation (a) buys from or sells to another products or services at prices above or below the current market, thus effecting an artificial distribution of profits, or (b) in any way so arranges its financial relationsMps with another corporation as to assign to it a disproportionate share of net income or invested capital.”
Congress, in the 1921 act, directed that the Revenue Act of 1917 (40 Stat. 300) should be construed under the terms of the act of 1921, so far as it affected the consolidated returns of affiliated domestic corporations made for the year 1917.
The right to malm a consolidated return was specified in the 1921 act as follows: “(2) when substantially all the stock of two or more corporations * * * was owned by the same interests: Provided, That such corporations or partnerships were engaged in the same or a closely related business, or one corporation or partnersMp bought from or sold to another corporation or partnership producís or services at prices above or below the current market, thus effecting an artificial distribution of profits, or one corporation or partnership in any way so arranged its financial relationships with another corporation or partnersMp as to assign to it a disproportionate share of net income or invested capital.” 42 Stat. c. 136, pp. 227, 319, § 1331 (b), 26 USCA § 1067 (b).
In plaintiff’s reply brief, it is conceded that the right of plaintiff to recover depends upon its showing that:
“First: Was substantially all of the stock of all six corporations owned during the year 1917 by the same interests?
“Second: Were the intercorporate relations between the members of the group such as to meet the requirements of Regulations 41 Article 77 and of the 1921 Declaratory Act?”
It is necessary that plaintiff establish, to the satisfaction of the court, that its corporations come within both of these concessions.
Counsel for the defendant has cited the case of Handy & Harman v. Burnet, 284 U. S. 136, 52 S. Ct. 51, 76 L. Ed. 207, as controlling the first question necessary to be demonstrated by the plaintiff.
We may assume, I believe, that the language used in the 1921 act is now controlling as .to Regulation 41, supplanting it, or else states, in other language, the principle of the regulation on this point.
Counsel for plaintiff claims that the result of the decision in Handy & Harman v. Burnet, supra, was on the point of the meaning of the word “control,” which does not appear in the regulations or the act of 1921. The language of the 1921 act, on this point, is as follows: “When substantially all the stock of two or more corporations * * * was owned by the- same interests.”
Compared with this is the language of the 1918 act, under which the above ease was decided: “If substantially all the stock of two or more corporations is owned or controlled by the same interests.” (Italics mine.) 40 Stat. c. 18, pp. 1057, 1081, 1082, § 240 (b).
The language is substantially the same, except the insertion of the words “or controlled.”
The act of 1918 adds these words, and under that law the taxpayer may, and should, file consolidated returns, if the allied corporations come within either distinction, i. e., “owned” “or controlled,” whereas, under the regulations and the act of 19-21, the matter of control was not included. It extended the law, providing for two distinct conditions.
• The decision in the case of Handy & Harman v. Burnet, supra, does not rest upon the question of control only. As I read the opinion, the court had disposed of both contentions; the first as to ownership, the second as to control. With relation to ownersMp, the court said: “The purpose of section 240 was, by means of consolidated returns, to require taxes to be levied according to the true net *652income and invested capital resulting from and employed in a single business enterprise even though it was conducted by means of more than one corporation. Subsection (b) clearly reflects the intention, by means of such returns, to secure substantial equality as between shareholders who ultimately bear the burden. That intention is shown by the legislative history and was given effect by .the regulations contemporaneously promulgated. It requires no discussion to show that such returns will not make against inequality or evasion unless the same interests are the beneficial owners in like proportions of substantially all of the stock of each of such corporations. Alameda Investment Co. v. McLaughlin (D. C.) 28 F. (2d) 81; Montana Mercantile Co. v. Rasmusson (D. C.) 28 F.(2d) 916; Commissioner v. Adolph Hirsch & Co. (C. C. A.) 30 F.(2d) 645, 646; Commissioner of Internal Revenue v. City Button Works (C. C. A.) 49 F.(2d) 705. Affiliation on any other basis would not make against inequality or evasion.” Handy & Harman v. Burnet, 284 U. S. 140, 141, 52 S. Ct. 51, 52, 76 L. Ed. 207.
With relation to control the court said: “It would require very plain language to show that Congress intended to permit consolidated returns to depend on a basis so indefinite and uncertain as control of stock without title, beneficial ownership or legal means to enforce it. Control resting solely on acquiescence, the exigencies of business or other considerations having no binding force is not sufficient to satisfy the statute.” Id., 284 U. S. page 141, 52 S. Ct. 51, 53, 76 L. Ed. 207.
The Supreme Court, as I construe its decision, having fully settled this much-discussed question, it does not seem necessary or advisable that I should attempt to discus's or analyze the various decisions presented by counsel, except to call attention to the cases cited in the above quotations, and which cases are approved by the Supreme Court.
The decision on this question against the plaintiff disposes of the action, because, to recover, the plaintiff must establish affirmatively to the satisfaction of the court both questions hereinbefore referred to. No opinion is expressed as to whether one corporation sold to another services above or below the current market, or whether any such arrangement assigned to any of the corporations a disproportionate share of net ineome or invested capital.
Finding the fact, as I do, that substantially all the stock of the corporations filing consolidated return was not owned by the same interests, and applying the law, as herein-before stated, as laid down in the case of Handy & Harman v. Burnet, supra, the result is a verdict in favor of the defendant, and judgment may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224459/ | DECISION AND ORDER
SPATT, District Judge.
On December 2, 2013, the Plaintiff United States of America (the “United States”) brought this civil in rem action to forfeit and condemn to its use and benefit (1) four New York properties, namely (a) 249-20 Cambria Avenue, Little Neck, New York 11362, (b) 42-34 189th Street, Flushing, New York 11358, (c) 61-12 213th Street, Bayside, New York 11364, and (d) 37-32 10th Street, Long Island City, New York 11101 (the Defendant “New York Properties”); (2) two Florida Properties (a) 100 Live Oaks Blvd., Casselberry, Florida 32707 and (b) West Irlo Bronson Memorial Highway, Kissimmee, Florida 34747 (the “Defendant Florida Properties”), and (3) $70,068.00 and $30,760.00 in United States Currency (the “Defendant Funds”) (collectively the “Defendants In Rem”). According to the complaint, the Defendants In Rem are subject to forfeiture pursuant to: (a) 18 U.S.C. § 981(a)(1)(C), as property constituting or derived from proceeds traceable to violations of 18 U.S.C. § 545; and/or (b) 18 U.S.C. § 2323(a), as property used in any manner or part to commit or facilitate the commission of violations of 18 U.S.C. § 2320, and/or property constituting or derived from proceeds obtained directly or indirectly as a result of violations of 18 U.S.C. § 2320.
On March 26, 2014, claimants Chee Kuen Yim, Chee Kwan Yim, Chee Ching Yim, Yi Rong Liu, Rui Zhu Zheng, Qiao Chen, Regina Ngan, Swee Choo Ngan, and Shu Yu Lin (the “Individual Claimants”) moved pursuant to Federal Rule of Civil Procedure (“Fed. R. Civ.P.”) 12 to dismiss this in rem civil forfeiture action for lack of subject matter jurisdiction on the ground that there is a prior pending civil forfeiture proceeding against the Defendant New York Properties in Supreme Court, Suffolk County, captioned Spota v. Yim, No. 13-7703 (the “State Civil Action”), and pending orders of attachment against the New York Properties in that proceeding.
On May 27, 2014, 21 F.Supp.3d 247, 2014 WL 2198618, the Court denied the Claimants’ motion. Presently pending before the Court are (1) a motion by the Individual Claimants pursuant to Local Civil Rule 6.3 for reconsideration of the May 27, 2014 order; and (2) a motion by the Individual Claimants and related non-party, non-claimant entities, Goodies Enterprise Inc., *257Chens Family Investments LLC and JCA Investment Property, LLC, pursuant to 18 U.S.C. § 981(g)(2) to stay this proceeding on the ground that (A) they are the subjects of a related criminal proceeding pending in Supreme Court, Suffolk County, People v. Goodies Enterprise, Inc., et al, 670/13 and 675/13 (the “State Criminal Action”); (B) they have standing to assert claims in this proceeding; and (C) continuation of this forfeiture proceeding would burden the Fifth Amendment rights of the Individual Claimants against self-incrimination in the State Criminal Action. For the reasons set forth, the Court denies the motion for reconsideration and grants in part and denies in part the motion for a stay.
I. BACKGROUND
A. The State Actions
In or about December 2010, the Suffolk County District Attorney’s Office, Asset Forfeiture Unit (the “SCDA”) initiated an investigation involving the importation, transportation, distribution, and sale of trademark counterfeit goods in the New York Metropolitan area and elsewhere.
The SCDA identified, among others, Chee Kuen Yim (“Janice Yim”), Chee Kwan Yim (“Jimmy Yim”), Chee Ching Yim (“Steve Yim”), and Regina Ngan (“Tina Ngan”) of Queens, New York, as well as Anthony Moresco (“Moresco”) of Rutherford, New Jersey as main targets (collectively the “Targets”). These persons allegedly participated in a scheme to knowingly import and sell counterfeit designer handbags, boots, jackets, pocketbooks, sunglasses, jewelry, and other merchandise (the “Trademark Counterfeit Scheme”). The Targets allegedly conspired to import this counterfeit merchandise from China, store it at facilities in Queens, New York, and then distribute it to “street sellers” throughout the New York metropolitan area, Florida, Pennsylvania, Illinois, Georgia, and California.
Beginning on or about March 15, 2013, the Targets were arraigned in New York State Court in connection with the Trademark Counterfeit Scheme. Indictments were returned against the Targets, among others.
On or about May 8, 2013, New York State commenced the State Civil Action pursuant to Article 13-A of the New York Civil Practice Law and Rules (“CPLR”). The named defendants in the State Civil Action are, among others, Jimmy Yim, Janice Yim, Steve Yim, Tina Ngan, Mores-co, Swee Choo Ngan, Zhou Yu Lin, Quiao Chen (the “State Civil Defendants”). In the State Civil Action, New York State seeks a judgment in the amount of $6,721,667.00 against the State Civil Defendants, jointly and severally, as the proceeds of the criminal activity.
At some point in the State Civil Action, New York State obtained two ex parte orders of attachments pursuant to CPLR § 1317 (the “Attachment Orders”) which, among other things, restrained “all property of, or debts owing to the [State Civil Defendants [therejin for the sum of $6,721,667.00, as the proceeds, substituted proceeds and/or instrumentalities of defendants’ criminal conduct.” Included in the properties which could be levied on under the order of attachment were the Defendant New York Properties. In other words, the attachment orders prohibited the State Civil Defendants from further encumbering the Defendant New York Properties.
Pursuant to Section 1322 of the CPLR, agents from the SCDA’s Office levied upon the Defendant New York Properties by filing a notice of attachment with the local county clerk. At that time, also pursuant to CPLR Section 1322, the county clerk *258recorded and indexed the notice of attachment in the same manner and with the same effect as a notice of the pendency of an action.
The Claimants opposed the SCDA’s motion to confirm the ex parte attachments. On February 11, 2014, Supreme Court, Suffolk County, confirmed the attachments. A motion for reconsideration of that order is currently pending before the Supreme Court.
B. The Present Action
As noted above, on December 2, 2013, the United States commenced this civil in rem action seeking the forfeiture of the Defendants In Rem for the United States’ use and benefit. Thereafter, the Individual Claimants separately filed claims pursuant to Rule G of the Supplemental Rules for Certain Admiralty and Maritime Claims (“Rule G”).
On March 26, 2014, the Individual Claimants filed a motion to dismiss the complaint for lack of subject matter jurisdiction. Relying on Penn Gen. Cas. Co. v. Commonwealth of Pennsylvania ex rel. Scknader, 294 U.S. 189, 195, 55 S.Ct. 386, 389, 79 L.Ed. 850 (1935), the Individual Claimants argued that the commencement of the State Civil Action pursuant to Article 13-A of the CPLR constitutes a sufficient exercise of in rem jurisdiction over the properties sought to be forfeited so as to bar a subsequent federal in rem civil forfeiture proceeding against the same property. Alternatively, the Individual Claimants argued that by issuing the Attachment Orders, the Supreme Court, Suffolk County secured in rem jurisdiction over the properties sought to be forfeited here. The United States opposed the Individual Claimants’ motion to dismiss.
On May 27, 2014, this Court denied the Individual Claimants’ motion. The Court noted “the common-law rule of long standing [which] prohibits a court, whether state or federal, from assuming in rem jurisdiction over a res that is already under the in rem jurisdiction of another court.” (Dec. & Order, at 251.) Conversely, the Court stated that “that where one action is in personam and one in rem, both cases may proceed simultaneously” (Id. at 252.) The Court then considered the question whether “a New York State civil action commenced pursuant to Article 13-A of the CPLR amounts to a jurisdictional bar to a later-commenced civil in rem action in federal court.” (Id. at 252.) The Court noted that “Article 13-A by its terms makes clear that it is an in person-am, rather than in rem, statute.” (Id. at 253). The Court further reasoned:
The fact that the Supreme Court, Suffolk County issued the Attachment Orders, which encompassed the New York Properties, does not thereby convert the State Civil Action into ah in rem action. An order of attachment under CPLR § 1317 is merely a provisional remedy used to enforce monetary judgments under Article 13-A. In particular, the Attachment Orders only prohibit the State Civil Defendants from further encumbering the New York Properties so as to protect the State’s interest in their equity, which may be used to potentially satisfy a judgment in the State Civil Action.
In this regard, the concerns about comity expressed by the Supreme Court of the United States in Penn General and its progeny are not present here. Stated otherwise, the steps taken by New York State in the State Civil Action do not conflict with any potential order of forfeiture by this Court. If the Defendant New York Properties are forfeited to the United States, the United States would take ownership and possession of *259the properties, subject to any mortgages, liens, or encumbrances thereon. If New York State is subsequently granted a judgment against the State Civil Defendants, and chooses to. satisfy all or part of that judgment with equity contained in the Defendant New York properties, it would do so against the United States, who would pay the state as a judgment creditor, along with other judgment creditors/mortgage holders.
(Id. at 253-54).
As noted above, presently pending before the Court are (1) a motion by the Individual Claimants pursuant to Local Civil Rule 6.3 for reconsideration of the May 27, 2014 order; and (2) a motion by the Individual Claimants and related non-claimant entities, Goodies Enterprise Inc., Chens Family Investments LLC and JCA Investment Property, LLC, pursuant to 18 U.S.C. § 981(g)(2) to stay this proceeding on the ground that (A) they are the subjects of a related criminal proceeding pending in the State Criminal Action; (B) they have standing to assert claims in this proceeding; and (C) continuation of this forfeiture proceeding will burden the Fifth Amendment rights of the Individual Claimants against self-incrimination in the State Criminal Action.
II. DISCUSSION
The Court’s resolution of the motion for reconsideration may render the motion for a stay moot. Therefore, the Court first considers the motion for reconsideration.
A. The Motion for Reconsideration
Motions for reconsideration may be brought pursuant to Rules 59(e) and 60(b) of the Federal Rules, of Civil Procedure and Local Rule 6.3. See Wilson v. Pessah, No. 05-CV-3143 (JFB)(AKT), 2007 WL 812999, at *2 (E.D.N.Y. Mar. 14, 2007). “The standard for granting such a motion is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked — matters, in other words, that might reasonably be expected to alter the conclusion reached by the court.” Hochstadt v. New York State Educ. Dep’t, 547 Fed.Appx. 9, 11 (2d Cir.2013) (citation and quotation marks omitted).
A motion for reconsideration is appropriate when the moving party believes the Court overlooked important “matters or controlling decisions” that would have influenced the prior decision. Shamis v. Ambassador Factors Corp., 187 F.R.D. 148, 151 (S.D.N.Y.1999). Reconsideration is not a proper tool to repackage and relitigate arguments and issues already considered by the Court in deciding the original motion. See United States v. Gross, No. 98-CR-0159(SJ), 2002 WL 32096592, at *4 (E.D.N.Y. Dec. 5, 2002) (“A party may not use a motion to reconsider as an opportunity to reargue the same points raised previously.”). Nor is it proper to raise new arguments and issues. See Lehmuller v. Inc. Vill. of Sag Harbor, 982 F.Supp. 132, 135 (E.D.N.Y.1997).
In this case, the Individual Claimants contend that this Court overlooked controlling legal authority holding that an attachment of real property constitutes a “seizure” and confers jurisdiction on the court that issues it. The Individual Claimants essentially argue that this Court elevated form over substance when it declined to recognize the ex parte attachment orders in the State Civil Action as conferring in rem or quasi in rem jurisdiction upon the State court.
However, even if an attachment of real property effects a “seizure” of property, it does not follow that such “seizure,” by itself, confers in rem or quasi in rem *260jurisdiction over that property. In the State Civil Action, the orders of attachment were sought and confirmed pursuant to CPLR § 1317. Nothing in the text of that statutory provision, or the case law interpreting it, confers in rem or quasi in rem jurisdiction by virtue of such an attachment. Cf. United States v. $4.90,920 in United States Currency, 911 F.Supp. 720 (S.D.N.Y.1996) (finding statute provided in rem jurisdiction where statute and case law provided that seized items be held “in the custody of the court”), modified on other grounds, 937 F.Supp. 249 (S.D.N.Y.1996), reconsideration denied, No. 95 Civ. 8743(LAP), 1997 WL 452360 (S.D.N.Y. Aug. 7, 1997).
Furthermore, in Republic Nat. Bank of Miami v. United States, 506 U.S. 80, 113 S.Ct. 554, 559, 121 L.Ed.2d 474 (1992), the Supreme Court of the United States stated that, “it long has been understood that a valid seizure of the res is a prerequisite to the initiation of an in rem civil forfeiture proceeding.” 506 U.S. at 84, 113 S.Ct. at 557. In other words, a court must have actual or constructive control of the res when an in rem forfeiture action is initiated. However, here, New York State obtained the orders of attachment after the commencement of the State Civil Action.
It bears emphasizing that the Individual Claimants (1) advance no credible reason why this Court should ignore the plain terms of CPLR Article 13-A which makes clear that it is an in personam, rather than in rem, framework or (2) fail to articulate how this case implicates the concerns about comity expressed by the Supreme Court in Penn General and its progeny.
In this latter regard, the Individual Claimants argue that this Court’s reliance on United States v. $3,000,000 Obligation of Qatar Nat. Bank to Nomikos, 810 F.Supp. 116, 118 (S.D.N.Y.1993) was misplaced. There, the United States brought a forfeiture action under 18 U.S.C. § 981 against funds allegedly derived from an unlawful sale of aircraft parts to Libya. 810 F.Supp. at 116. In August 1989, one of the individuals involved in the illegal export scheme filed an action in New York state court and, by way of an order to show cause, sought to restrain the payment of the funds. Id. at 117. The court issued the temporary restraining order and, on April 24, 1990, issued a preliminary injunction enjoining payment of the funds to certain individuals involved in the export scheme. Id.
In October 1990, the United States filed a federal forfeiture action against the funds. Id. A claimant moved to dismiss the federal action for lack of subject matter jurisdiction. The Court denied that motion, reasoning, in part:
The rulings and judgments of this court need not in any way affect or interfere with the state court’s jurisdiction over the res, or give rise to concerns of comity, ... because, in an action of this nature, the federal court could stay the execution of its judgment as to the res and assert a lien that would result in seizure of the asset only upon its release from the state court’s control.
Id. at 118.
In the May 27, 2014 order, this Court did not cite $3,000,000 Obligation of Qatar Nat. Bank as on “all fours” with this case, but simply for the proposition that concerns about comity should inform a court’s analysis about whether to dismiss a later-filed federal civil in rem forfeiture action.
Furthermore, contrary to the contention of the Individual Claimants, the decision in $490,920 in U.S. Currency distinguished rather than rejected $3,000,000 Obligation of Qatar Nat. Bank. $490,920 in U.S. Currency involved personal property that was *261seized by state authorities pursuant to a warrant issued by the state court. Under New York law, such property was to be retained by the court issuing the warrant, or in the custody of the person who sought the warrant upon condition that such person comply with all orders of the issuing court to return the property to that court or turn it over to another court. 911 F.Supp. at 724 (citing N.Y.Crim. Proc. Law § 690.55(1)). The state district attorney moved the state court to turn the property over to the federal government, but the court denied the motion and granted a cross-motion for the return of the property to the parties from whom it had been seized. Id. at 723. Despite this court order, the state district attorney arranged for the property to be turned over to the federal government, and federal authorities then sought seizure in federal court. Id. at 723-24.
The federal court concluded that New York’s warrant and seizure scheme vested in rem jurisdiction in the state court until such time as the court issued an order releasing the seized property from its control. Id. at 725. The federal court declined to exercise jurisdiction over the seized property because it held that, despite the transfer of physical custody to federal authorities, and in the absence of a proper “turnover order,” the New York state court still had exclusive jurisdiction over the seized property. Id. at 731-32. In particular, the federal court reasoned:
Unlike $8,000,000 Obligation or the cases upon which it relies, the Government filed this complaint in the midst of its intentional violation of [the state courtj’s October 11 Order regarding the possession and custody of the Funds. With each passing day, in other words, the Government and the D.A.’s Office are in further violation of an order that directly implicates the concerns of comity which lie at the core of the doctrine of exclusive in rem jurisdiction. Further, for reasons unarticulated, the Government chose not to appeal the October 11 Order or to renew its request of [the state court] for a turnover order after filing the instant action on October 13, 1995. Instead, the Government stands before this Court requesting an in rem seizure warrant in an attempt to cure what it concedes is a “potential defect in in rem jurisdiction.” (Government Brief, at 5.) The Government’s plea to the need to “vindicate its independent interest in seeking forfeiture of the funds” (id.) does not mask the reality of its willful and continuous violation of an order regarding the possession and custody of a res already subject to another court’s jurisdiction. To encourage this ongoing violation is to render the concerns of comity a nullity. The Government’s reliance on decisions which suggest that certain exercises of concurrent in rem jurisdiction are permissible is without merit and thus does not allay the concerns of comity.
Id. at 731.
Unlike in $490,920 in U.S. Currency, here, as previously stated, there does not appear to be any concerns of comity implicated by recognizing this Court’s subject matter jurisdiction in this action.
The Individual Claimants also repeat their argument that this proceeding is invalid because the Supreme Court, Suffolk County has not issued a turnover order and the United States has failed to comply with the notice provisions of the federal forfeiture laws. This Court previously rejected this argument
because the [Individual] Claimants ignore' the applicable section of that statute, which states that where “the property is seized by a State or local law enforcement agency and turned over to *262a Federal law enforcement agency for the purpose of forfeiture under Federal law, notice shall be sent not more than 90 days after the date of seizure by the State or local law enforcement-agency.” 18 U.S.C. § 983(a)(1)(A)(iv). However, here, no real property was ever “seized” by New York State. The real property at issue remains in the possession of the current owner, the applicable State Civil Defendants, who, in fact, continue to occupy and/or rent and collect income therefrom.
(Dec. & Order, at 254.)
To clarify this issue for purposes of the motion for reconsideration, although attachment can effect a constructive “seizure” of property, a close reading of 18 U.S.C. § 983(a)(1)(A)(iv) indicates that this provision contemplates a physical “seizure” of the property. Indeed, the language in this provision that the property be “turned over to” federal law enforcement supports the conclusion that property is “seized” within the meaning of 18 U.S.C. § 983(a)(1)(A)(iv) when law enforcement exercises physical dominion over the property. See Commack Self-Serv. Kosher Meats v. Hooker, 680 F.3d 194, 213 (2d Cir.2012) (“[T]he court does not look at the statutory language in isolation; rather, the court considers the language in context, with the benefit of the canons of statutory construction and legislative history.”); JWJ Indus., Inc. v. Oswego County, No. 09-CV-740(TJM), 2012 WL 5830708, at *3 (N.D.N.Y. Nov. 16, 2012) (stating that a court must look at a statute in context); Vt. Right to Life Comm., Inc. v. Sorrell, 875 F.Supp.2d 376, 390 (D.Vt.2012) (same).
Accordingly, the Court denies the motion for reconsideration because the Individual Claimants fail to establish that this Court overlooked controlling authority.
B. The Motion for a Stay
As noted above, the Individual Claimants, together with related non-claimant entities, Goodies Enterprise Inc., Chens Family Investments LLC and JCA Investment Property, LLC, seek to stay this matter pending the outcome of the criminal proceedings on the ground that civil discovery would burden the Individual Claimants’ Fifth Amendment rights against self-incrimination in the State Criminal Action.
Under the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”), Section 981(g)(2) provides that upon the filing of a motion by a claimant, the Court shall stay a civil forfeiture proceeding where: (1) the claimant is the subject of a related criminal case or investigation; (2); the claimant has standing to assert a claim in the civil forfeiture proceeding; and (3) the continuation of the forfeiture proceeding would burden the right of the claimant against self-incrimination in the related criminal case. The statute further defines what constitutes a “related criminal case” or “related criminal investigation”:
In this subsection, the terms “related criminal case” and “related criminal investigation” mean an actual prosecution or investigation in progress at the time at which the request for the stay ... is made. In determining whether a criminal case or investigation is “related” to a civil forfeiture proceeding, the court shall consider the degree of similarity between the parties, witnesses, facts, and circumstances involved in the two proceedings, without requiring an identity with respect to any one or more factors.
18 U.S.C. § 981(g)(4);
At the outset, the Court notes that the United States does not dispute that the Individual Claimants are the subject of a related criminal proceeding and that the *263statute’s standing requirement is satisfied. Rather, the United States contests the third element under 18 U.S.C. § 981(g)(2), namely whether the continuation of the forfeiture proceeding would burden the right of the claimants against self-incrimination in the related criminal case.
In this regard, the United States asserts that the Individual Claimants cannot show a burden on their Fifth Amendment rights against self-incrimination in the State Criminal Action because they have already plead and allocuted, and only await sentencing. However, this characterization of the status of the related criminal case is not supported by the record. In fact, the State Criminal Defendants have agreed to conditional pleas, contingent on the resolution of all proceedings involving Claimants and their property, including this case. (Lawrence H. Schoenbach Decl., at 7-8).
Further, the Court finds that a stay of these proceedings is warranted pursuant to Section 981(g) because civil discovery, including depositions of the Individual Claimant, would burden their respective right against self-incrimination in the State Criminal Action. See 18 U.S.C. § 981(g)(2). In the Court’s view, more specific disclosure of prejudice than that advanced here by the Individual Claimants through evidentiary support will only result in the very prejudice in the criminal proceeding that they seek to avoid. Thus, having satisfied all three elements for a stay under 18 U.S.C. § 981(g)(2), the Court grants the motion by the Individual Claimants for stay of this matter pending resolution of the related criminal proceeding.
The United States contends that the Individual Claimants waived their Fifth Amendment rights because (1) United States Magistrate Judge Gary R. Brown implemented a discovery schedule on May 2, 2014 and (2) the claimants have answered some special interrogatories without interposing any Fifth Amendment objections. These contentions are without legal merit. First, as the United States acknowledges, the discovery schedule was entered over the Individual Claimants’ objection. Second, the Individual Claimants’ responses to the United States’ special interrogatories set forth only the basic information required by Rule G, necessary to establish the Individual Claimants’ standing.
The United States further argues, in a conclusory fashion, that any stay of this matter would prejudice it given the volatility inherent in the real estate market. However, the United States presents no evidence to this effect. Further, the Court notes that the properties have been restrained by the State and the Individual Claimants are maintaining the properties at their own expense during the pendency of this matter.
Finally, the United States asserts that some of the Individual claimants — namely, Yi Rong Liu, Rui Zhu Zheng, and Zhu Yu Lin, who appear to be family members of the State Criminal defendants — -are not defendants in the State Criminal Proceeding and that they make no showing that they are part of any continuing investigation. However, CAFRA does not require complete “identity ... between the parties, witnesses, facts, and circumstances involved in the two proceedings.... ” 18 U.S.C. § 981(g)(2)(4). These particular “[cjlaimants are family members of the defendant, and even if there is not an ‘identity’ of parties in both actions, there is an identity of interests.” United States v. Approximately $69,577 in U.S. Currency, C 09-0674(PJH), 2009 WL 1404690, at *3 (N.D.Cal. May 19, 2009); United States v. Leasehold Interests In 118 Avenue D, 754 F.Supp. 282, 289 (E.D.N.Y.1990) (pre-CAFRA case concluding that stay was ap*264propriate even though the claimant was not a defendant in the related criminal case). Accordingly, the stay is also applicable as to these particular Individual Claimants.
However, unless and until the related non-claimant entities Goodies Enterprise, Inc., Chens Family Investments LLC, and JCA Investment Property, LLC file claims on their own behalf in this matter and move for a stay under 18 U.S.C. § 981(g)(2), the Court will not issue a stay as to them for the simple reason that there is no matter to stay as to them. Therefore, at this stage of the litigation, the Court need not consider the United States’ argument that these corporations have no right to seek a stay under 18 U.S.C. § 981(g)(2) because they do not possess a Fifth Amendment right against self-incrimination.
Accordingly, the Court grants the motion for a stay as to the Individual Claimants pending the resolution of the related criminal proceedings and denies the motion for a stay as to the non-parties, non-claimants related entities.
III. CONCLUSION
For the foregoing reasons, the Court denies the motion for reconsideration of the May 27, 2014 order and grants in part and denies in part the motion for a stay of that order. In particular, the Court the Court grants the motion for a' stay as to the Individual Claimants pending the resolution of the related criminal proceedings and denies the motion for a stay as to the nonparties, related entities.
SO ORDERED. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224461/ | OPINION & ORDER
DENISE COTE, District Judge:
On February 7, 2014, defendant Vincent Pacifico (“Pacifico”) moved to dismiss plaintiffs’ Second Amended Complaint. For the reasons below, Pacifico’s motion is granted as to Count IV and otherwise denied.
BACKGROUND
Plaintiffs Adam Smith (“Smith”), Frank D’Angelo (“D’Angelo”), and Dawn Jasper (“Jasper”) allege the following facts in *279their Second Amended Complaint (“SAC”). Between May 31, 2011 and January 2012, plaintiffs created wholly original label designs (the “Label Materials”), packaging, advertisements, and a website (the “Website”) to promote and market defendants’ Mikki More hair-care products. D’Angelo also negotiated with retail outlets to place Mikki More products; oversaw and approved Mikki More packaging, as well as a marketing and promotional campaign for Mikki More; and paid for certain expenses related to the Mikki More venture totaling several thousand dollars. On November 17, 2011, D’Angelo and defendant Darían Braun (“Braun”) agreed that, as payment, D’Angelo was to receive 20% of the outstanding shares of Rock Care Corp. (“Rock Care”), a New York corporation owned by Braun that controlled the manufacture, promotion, marketing, and sale of the Mikki More hair-care product line. On December 12, 2011, Braun delivered a share certificate for a 2% interest in Rock Care. D’Angelo repeatedly demanded the promised 20% interest; Braun subsequently admitted on several occasions that he had promised D’Angelo 20%, not 2%, but refused to transfer the balance. Jasper was also promised payment for creation of the Website, but was never paid.
In July 2012, D’Angelo sought assistance from his long-time friend, defendant Pacifi-co. D’Angelo explained that plaintiffs had created the Label Materials, store displays, advertising and promotional campaigns, and the Website; that in exchange Braun had promised 20% of the net proceeds of the Mikki More venture; and that Braun had refused to compensate plaintiffs as promised. Pacifico told D’Angelo he would investigate and attempt to settle the dispute.
Instead, in August 2012, Pacifico struck a deal with Braun. Pacifico formed defendant Mikki More LLC and acquired on behalf of the LLC all rights to the Mikki More products from Rock Care. Braun was compensated by Pacifico for an interest in Mikki More LLC; Braun kept a 50% interest in the LLC. At the time, Pacifico knew that he and Braun would be using unauthorized, copyrighted works created by plaintiffs, including the Label Materials and Website, for labeling, advertising, and promotion of the Mikki More products.
Thereafter, Braun and Pacifico learned that high-resolution digital files of plaintiffs’ work were required. Braun personally promised plaintiffs to pay outstanding fees in order to obtain from plaintiffs these high-resolution files. Braun also promised Jasper additional payment for managing Mikki More’s Facebook page, its Twitter account, and other social media marketing. Because Braun did not pay these fees, plaintiffs refused to hand over the files. Braun and Pacifico then agreed to hire Troy Hahn (“Hahn”) to re-create the digital files using copies of the copyrighted works. Plaintiffs attach to the SAC a copy of the check issued to Hahn for this work, as well as the envelope enclosing that check, which plaintiffs allege was sent from Pacifico’s office.
D’Angelo and Smith applied to the United States Copyright Office for registration of copyright in the “text” and “2-D artwork” in the Label Materials and received Registration Number VAu 1-137-371, effective April 3, 2013 (the “Label Materials Copyright”). D’Angelo, Smith, and Jasper applied for registration of copyright in “text” and “2-D artwork” in the Website and received Registration Number VAu 1-137-618, effective April 16, 2013 (the “Website Copyright”). Copies of both registration statements, and of the deposits of material covered by those registrations, are attached to the SAC. In particular, Exhibit B to the SAC includes advertising, *280packaging, and labels for Mikki More products, photographs of Ricky’s NYC storefronts showing the claimed advertising for Mikki More in the display windows, and a design with two linked orange spirals against a black background that appears in many of the claimed advertisements, packages, and labels. Exhibit D includes pages of the Website, which include some of the text and 2-D artwork in Exhibit B.
Defendants have made copies and derivative works from the Label Materials without plaintiffs’ permission as they continue to use the Label Materials on Mikki More products, in Mikki More advertisements, and in Mikki More marketing materials. In particular, copies or derivative works from the Label Materials appear in various Ricky’s stores in New York City, in the beauty industry publication Paramount, and on the Mikki More Facebook page. Defendants have also made copies or derivative works from the Website without plaintiffs’ permission, including on Mikki More’s own website and on the Mikki More Facebook page.
On June 6, 2013, plaintiffs brought the instant suit against defendants for infringement of both of the above copyrights, for breach of contract, and for relief on theories of unjust enrichment and quantum meruit. Plaintiffs’ SAC was filed December 30, 2013.1 Fact discovery closed on February 28. Shortly before, on February 7, Pacifico moved for judgment on the pleadings. For the reasons set out below, that motion is granted in part.
DISCUSSION
When considering a motion to dismiss, a court must accept as true all allegations in the complaint and draw all reasonable inferences in the plaintiffs’ favor. Keiler v. Harlequin Enters. Ltd., 751 F.3d 64, 68, 2014 WL 1704474, at *3 (2d Cir. May 1, 2014). 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted); see Alcantara v. Bakery & Confectionery Union & Indus. Int’l Pension Fund Pension Plan, 751 F.3d 71, 75, 2014 WL 1705015, at *2 (2d Cir. May 1, 2014) (recognizing that courts are to apply the “same standard” to motions brought under Rules 12(b)(6) and 12(c)). The court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted). Accordingly, a court may disregard “[tjhreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Id.
Applying the plausibility standard is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937. “Plausibility depends on a host of considerations: the full factual picture presented by the complaint, the *281particular cause .of action and its elements, and the existence of alternative explanations so obvious that they render plaintiffs inferences unreasonable.” Fink v. Time Warner Cable, 714 F.3d 739, 741 (2d Cir.2013) (citation omitted). Although the focus should be on the pleadings in considering a motion to dismiss, the court will deem the complaint to include “any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are ‘integral’ to the complaint.” L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir.2011) (citation omitted).
I. Counts I to III: Copyright Infringement
A certificate of registration máde within five years after the first publication of a work is prima facie evidence of the validity of a copyright. 17 U.S.C. § 410(c). Copyright protection extends only to “original” works. Certificates of registration are also prima facie evidence of the originality of a work. Boisson v. Banian, Ltd., 273 F.3d 262, 268 (2d Cir.2001). Regardless of whether a work, or an element within a work, is “novel or unique,” it is “original” if it was “independently created by its author,” rather than “copied from pre-existing works,” and “comes from the exercise of the creative powers of the author’s mind.” Id.
To establish direct copyright infringement, a plaintiff must prove “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Artista Records, LLC v. Doe 3, 604 F.3d 110, 117 (2d Cir.2010) (citation omitted). Under common law tort principles, a defendant is liable for contributory infringement if, “with knowledge of the infringing activity, [the defendant] induces, causes or materially contributes to the infringing conduct of another.” Id. (citation and emphasis omitted). The knowledge standard is objective, and includes persons who “know or have reason to know of the direct infringement.” Id. at 118 (citation omitted). A defendant with such knowledge is liable where the defendant “engages in personal conduct that encourages or assists the infringement.” Id. (citation omitted). In deciding whether liability should attach for certain contributory conduct, courts look to “the function that the alleged infringer plays in the total reproduction process.” Id. (citation omitted).
Similarly, a defendant is vicariously liable for infringement where “the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials— even in the absence of actual knowledge that the copyright monopoly is being impaired.” Viacom Int’l, Inc. v. YouTube, Inc., 676 F.3d 19, 36 (2d Cir.2012) (citation omitted). “Individual officers of a corporation will be vicariously liable for the corporation’s infringing conduct” under these circumstances. Jonathan Adler Enters., LLC v. Ins. & Outs Pottery, Inc., 12 Civ. 4866(DLC), 2012 WL 4471540, at *1 (S.D.N.Y. Sept. 26, 2012); accord Softel, Inc. v. Dragon Med. & Sci. Commc’ns, Inc., 118 F.3d 955, 971 (2d Cir.1997) (applying this test in analysis of corporation’s president’s vicarious liability for copyright infringement by corporation).
Plaintiffs here have adequately pleaded their claims in Counts I to III against Pacifico, charging him with copyright infringement for copying the Label Materials and the Website and for hiring Hahn to re-create high-resolution digital files of these works. No party disputes that the Label Materials Copyright and the Website Copyright are valid, or that the SAC adequately alleges that the packaging and *282advertising for Mikki More products continue to use the Label Materials and that Mikki More’s website and Facebook page copy or derive from the Website designed by plaintiffs. Pacifico was well aware of this alleged infringement, as it was plaintiffs’ complaints about it that led Pacifico to purchase a stake in the Mikki More product line. And Pacifico was an active participant in this infringement: Pacifico agreed with Braun to hire Hahn to recreate high-resolution digital files of plaintiffs’ work, and it was Pacifico himself who wrote the check to Hahn.
Pacifico’s arguments to the contrary are unavailing. Pacifico first argues that Counts I to III fail to state a claim because plaintiffs do not allege “which specific works are the subject of their claims” as they “do not allege that everything contained in either the [Label Materials] or in the [Website] is original and copyrightable and protected by the registered copyrights.” In particular, Pacifico notes that some of the copyrighted text in the Label Materials and Website “includes non-original ... phrases” such as “leave-in conditioner,” “volumizing hair spray,” and “coming soon,” and complains that plaintiffs have not given him notice of what aspects of the “2-D artwork” are claimed to be original. The Label Materials Copyright and Website Copyrights constitute prima facie evidence of originality of the claimed “text” and “2-D artwork.” Fairly read, the SAC alleges that, without authorization, defendants have repeatedly copied the Label Materials and the Website in their entirety. This more than suffices to adequately allege that protected work was copied.
Pacifico also contends that plaintiffs fail to allege “what he actually did to participate in or cause the alleged infringement.” To the contrary, plaintiffs allege that shortly after learning about this infringement, Pacifico decided to invest in Mikki More knowing that plaintiffs’ work would continue to be used for advertising, packaging, labels, and the internet. Plaintiffs also allege that Pacifico agreed with Braun to hire Hahn to create high-resolution files of plaintiffs’ work and that Pacifico himself sent a check to Hahn for this work. Paci-fico argues that this allegation is “directly contradicted” by the check itself, which reads “Mikki More LLC” at the top. Pa-cifico is mistaken. This does not contradict plaintiffs’ allegation that Pacifico was the one to “send the check to Troy Hahn” from Pacifico’s office. These allegations adequately support the claims in Counts I to III against Pacifico.
II. Count IV: Breach of Contract
Under New York law,2 a breach of contract claim requires proof of “(1) an agreement, (2) adequate performance by the plaintiff, (3) breach by the defendant, and (4) damages.” Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir.2011) (citation omitted). As Pacifico notes, it is not clear from the SAC whether plaintiffs bring their breach of contract claim against Pacifico. Plaintiffs allege that D’Angelo and Braun agreed that, in exchange for D’Angelo services, he was to receive “twenty percent of the outstanding shares of Rock Care Corp.” or “twenty percent of the net profits of the [Mikki More] venture”; that D’Angelo performed the promised services; and that “Braun reneged,” giving *283D’Angelo only a 2% interest in Rock Care Corp., and accordingly “breached his contract,” causing D’Angelo to suffer damages.
Plaintiffs have not alleged any agreement with Pacifico. Nor do plaintiffs allege a sufficient factual basis for imputing Braun’s agreement to Pacifico. In their opposition to the instant motion, plaintiffs do not offer any basis for holding Pacifico liable for Braun’s agreement. Rather, plaintiffs ask “that this issue be held in abeyance ... until discovery is completed,” and state that they will withdraw this claim as to Pacifico if, “after discovery, it is clear Defendant Pacifico had nothing to do with or benefitted from, the Braun-D’An-gelo deal.” Notably, fact discovery closed on February 28, the same day plaintiffs filed their opposition to Pacifico’s motion to dismiss. Regardless, plaintiffs do not dispute that their allegations in the SAC do not state a claim as to Pacifico on the breach of contract claim. Accordingly, Count IV of the SAC is dismissed as to Pacifico.
III. Counts V to VI: Unjust Enrichment and Quantum Meruit
A plaintiff may recover for unjust enrichment in New York after establishing three elements: (1) the defendant benefitted (2) at the plaintiffs expense, and (3) equity and good conscience require restitution. Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue Shield of NJ, Inc., 448 F.3d 573, 586 (2d Cir.2006). Plaintiff need not be in privity with the defendant, but must “assert a connection [with defendant] that [i]s not too attenuated.” Georgia Malone & Co., Inc. v. Rieder, 19 N.Y.3d 511, 950 N.Y.S.2d 333, 973 N.E.2d 743, 747 (2012). “The essential inquiry in any action for unjust enrichment is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered.” Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 919 N.Y.S.2d 465, 944 N.E.2d 1104, 1110 (2011) (citation omitted).
Similarly, to recover in quantum meruit in New York, a plaintiff must establish “(1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services.” Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir.2005) (citation omitted). Under New York law, courts may consider a plea to recover in quantum meruit “together [with an unjust enrichment theory] as a single quasi contract claim.” Id. Because unjust enrichment and quantum meruit sound in quasi-contract, recovery is available only in the absence of an enforceable agreement that governs the same subject matter. Beth Israel, 448 F.3d at 586-87; MidHudson, 418 F.3d at 175.
Plaintiffs’ quasi-contract claim is adequately pled as to Pacifico under theories of both unjust enrichment and quantum meruit. Plaintiffs allege that Pacifico, having agreed to investigate — on plaintiffs’ behalf — Braun’s refusal to pay, instead cut a deal with Braun and purchased a stake in the Mikki More venture. Upon learning that high-resolution copies of plaintiffs’ work was required, Pacifico then hired Hahn to copy plaintiffs’ materials instead of paying plaintiffs what was owed them in exchange for their original high-resolution files. Pacifico accepted a benefit from plaintiffs’ work when he elected to invest in the Mikki More venture; plaintiffs, who performed their work in good faith with expectation of compensation, were never paid what was owed them; and equity requires restitution. Thus, plaintiffs’ allegations support their quasi-contract claim *284under both a theory of unjust enrichment and quantum meruit.
Quoting from Heller v. Kurz, 228 A.D.2d 263, 643 N.Y.S.2d 580 (1st Dep’t 1996), Pacifico argues that his “enrichment was [not] unjust” because plaintiffs’ work was “performed at the behest of someone other than [Pacifico]” and therefore plaintiffs should “look to that person for recovery.” Id. at 580. Pacifico is mistaken. Heller is a very different case, concerning a plaintiffs suit against defendants with whom he had no relationship.3 Indeed, the First Department has recently reaffirmed that, “although a plaintiff could satisfy th[e] requirement [of a ‘connection between the parties’] by alleging that the benefit was conferred at the behest of the defendant, the Court of Appeals has never required such a relationship.” Philips Int’l Investments, LLC v. Pektor, 982 N.Y.S.2d 98, 102-03 (1st Dep’t 2014) (citation omitted). Here, the relationship between Pacifico and plaintiffs is far from attenuated. Paci-fico became involved with the Mikki More venture because plaintiffs asked him for help, and he elected to purchase a stake knowing that plaintiffs had not been paid for their work on Mikki More’s advertising, labels, packaging, and website. Any ensuing benefit to Pacifico was manifestly unjust.
Pacifico also argues that he only benefit-ted from plaintiffs’ work as a shareholder of Mikki More LLC and that benefits to a shareholder cannot establish a basis for liability in quasi-contract. Pacifico’s only citation in support of this proposition is to LeBoeuf, Lamb, Greene & MacRae, LLP v. Worsham, 185 F.3d 61 (2d Cir.1999), which held summary judgment for plaintiff law firm inappropriate where it was unclear whether the law firm had offered its services to corporations, their principal shareholder, or to both. Id. at 66. This does not constitute a holding that a benefit to a corporation may never “benefit” a shareholder.
Here, although Pacifico is a shareholder of Mikki More LLC, plaintiffs do not seek to recover from Pacifico because he is a shareholder. Rather, drawing all inferences in favor of plaintiffs, Pacifico created Mikki More LLC and purchased his stake in the Mikki More venture with full knowledge of Braun’s failure to pay plaintiffs for their work, intending to take for himself some of the unjust enrichment Braun enjoyed as a result of plaintiffs’ uncompensated work. Although Pacifico structured the transaction to ensure that the benefits to him would pass through Mikki More LLC, it was Pacifico’s own acts, seeking to capture a benefit from plaintiffs’ work, that render his enrichment unjust.
In making the above argument, Pacifico notes that “[a] limited liability company, like a corporation, is an entity created to eliminate personal member/interest owner liability.” Even if plaintiffs could only reach Pacifico by piercing the corporate veil, they have alleged sufficient facts to do so. Pacifico created Mikki More LLC as the vehicle for his investment in the Mikki More venture, knowing that he would be participating in the infringement of plain*285tiffs’ rights. It is reasonable to infer that one of Paeifico’s motives in creating the limited liability company was to avoid personal liability for such infringement. A court sitting in equity is empowered to pierce the corporate veil in such circumstances. See ABN AMRO Bank, N.V. v. MBIA Inc., 17 N.Y.3d 208, 229, 928 N.Y.S.2d 647, 952 N.E.2d 468 (2011) (holding veil piercing is appropriate where “owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against [plaintiff]” (citation omitted)).
Finally, Pacifico argues that plaintiffs are not entitled to recovery in quantum meruit because they have “failfed] to allege the reasonable value of the services [they] provided.” Although, at trial, plaintiffs will have the burden of establishing the reasonable value of their services, they need not meet that burden at the pleading stage. The cases Pacifico cites are not to the contrary. Plaintiffs attach to the SAC copies of the work they performed for defendants, and it is quite plausible that they will be able to meet their burden at trial. They need not allege a right to a specific dollar amount to survive a motion to dismiss. Accordingly, Pacifico’s motion is denied as to plaintiffs’ quasi-contract claim.
CONCLUSION
Pacifico’s February 7 motion to dismiss the Second Amended Complaint is granted as to Count IV and otherwise denied.
. The SAC is comprised of six counts, as follows. Count I, styled "infringement of copyright,” is for the unauthorized copying of the Label Materials. Count II, "infringement of copyright,” is for unauthorized copying of the Website. Count III, "contributory copyright infringement,” is for retaining Hahn to re-create high-resolution digital versions of the copyrighted materials. Count IV, "breach of contract,” concerns Braun's failure to deliver to D’Angelo 20% of the net proceeds of the Mikki More venture or compensation received from sale of the rights to the Mikki More product line to Mikki More LLC. Count V, "unjust enrichment,” and Count VI, "quantum meruit,” seek to recover for D’Angelo’s contribution of marketing strategies, product ideas, and other efforts in the launching of the Mikki More product line.
. Pacifico cites New York law in support of its argument for dismissal of the breach of contract claim. Plaintiffs do not dispute that New York law applies to the contract. Both parties cite New York law in their arguments concerning plaintiffs' quasi-contract claim. “[W]here the parties agree that New York law controls, this is sufficient to establish choice of law.” Fed. Ins. Co. v. Am. Home Assurance Co., 639 F.3d 557, 566 (2d Cir.2011).
. Heller concerned a plaintiff seeking, in quantum meruit, a broker’s fee in connection with the underwriting of an initial public offering from those who “piggybacked the sale of their ... own stock,” which was merely “incidental” to the public offering. 643 N.Y.S.2d at 580. It was understood that plaintiff would be acting on behalf of the corporation and "would be taken care of by [the corporation].” Id. The court noted "the sale of stock is an inherently corporate function, and it is only logical that any expenses incurred in connection with the underwriting would be borne by the corporation.” Id. Accordingly, the court held that plaintiff should look to the corporation for remuneration, not to those who happened to sell their stock at the same time as the public offering. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224462/ | OPINION & ORDER
ANDREW J. PECK, United States Magistrate Judge.
Pro se plaintiff John Flanigan brings this action pursuant to § 205(g) of the Social Security Act, 42 U.S.C. § 405(g), challenging the final decision of the Commissioner of Social Security (the “Commissioner”) denying Disability Insurance Benefits (“DIB”) and Supplemental Security Income (“SSI”) benefits. (Dkt. No. 2: Compl.) Presently before the Court is the Commissioner’s motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). (Dkt. No. 16: Comm’r Notice of Motion.) The parties have consented to my decision of this case pursuant to 28 U.S.C. § 636(c). (Dkt. No. 31: Consent to Magistrate Judge Jurisdiction.)
For the reasons set forth below, the Commissioner’s motion for judgment on the pleadings (Dkt. No. 16) is GRANTED.
FACTS
Procedural Background
In September 2010 Flanigan applied for DIB and SSI benefits, alleging that he was disabled since November 1, 2008.- (Dkt. No. 13: Admin. Record filed by the Comm’r (“R.”) 13, 108; see also Dkt. No. 2: Compl. ¶ 5.) Flanigan alleged disability due to chronic obstructive pulmonary disease (“COPD”), severe back pain, cervical spine impairment, herniated disc, bulging' *288disc, degenerative disc disease, hypertensive cardiovascular disease, hypertension, headaches, spondylosis, neuropathy of the left wrist and high cholesterol. (R. 112; see also Compl. ¶ 4.) On December 10, 2010, the Social Security Administration (“SSA”) found that Flanigan was not disabled and denied his applications. (R. 46-54.) On January 19, 2011, Flanigan requested an administrative hearing. (R. 55-60.)
Administrative Law Judge (“ALJ”) Robert Gonzalez conducted the administrative hearing on January 31, 2012, at which Flanigan appeared with counsel. (R. 13, 21-42.) At the end of the hearing, ALJ Gonzalez left the record open to allow Flanigan’s counsel additional time to obtain and submit supplemental medical records, which she did. (R. 36-41, 205-06, 243-63.) On April 12, 2012, ALJ Gonzalez issued a written decision finding that Flan-igan was not disabled. (R. 10-17.) ALJ Gonzalez’s decision became the Commissioner’s final decision when the Appeals Council denied Flanigan’s request for review on April 16, 2013. (R. 1-3.)
On January 31, 2014, the Commissioner filed a motion for judgment on the pleadings. (Dkt. No. 16: Comm’r Notice of Motion.) On February 28, 2014, Flanigan filed an opposition brief attaching supporting documentation, including a limited number of new records that were not considered by ALJ Gonzalez or the Appeals Council. (See pages 293-95 below.)1 In his opposition, Flanigan argues that the November 1, 2008 disability onset date should be amended to December 8, 2008. (Flanigan Opp. Br. at 4-6; see page 293 below.) The Commissioner filed its reply brief on April 16, 2014. (Dkt. No. 27: Comm’r Reply Br.)
The issues before the Court are: (1) whether the Commissioner’s decision that Flanigan was not disabled between November 1 and December 31, 2008 (Flani-gan’s date last insured) is supported by substantial evidence, and (2) whether Flan-igan’s submission of additional evidence warrants a remand. Thus, this case involves benefits for at most a two-month period, November-December 2008.
Non-Medical Evidence
Flanigan was born on December 11, 1960 and was almost forty-eight years old at the alleged onset of his disability. (Dkt. No. 13: R. 108.) Flanigan obtained a general equivalency diploma (“GED”) in 1979. (R. 113.) Flanigan lives with his wife and three children. (R. 30.) Flanigan’s family *289depends on his wife’s SSI and Department of Social Services benefits. (R. 29-30.)
Flanigan worked as a warehouse supervisor from 1980 to 2003. (R. 25, 113.) From April 2003 to March 2005, Flanigan received workers’ compensation payments, “and once [he] got off that [he] started looking for work again actively.” (R. 25; see pages 294-95 below.) In July 2008, Flanigan found work as a warehouse supervisor at Burlington Coat Factory, where he performed “manual labor,” “constant lifting, movement,” “[l]oading trucks” and “general warehouse work.” (R. 25-27, 113-14.) Flanigan stopped working at Burlington Coat Factory in December 2008 because his neck pain was causing nausea and severe headaches whenever he had to bend or lift. (R. 27-31; see page 293 below.) Flanigan “spoke to [his] doc-, tor about ... try[ing] to look for another line of work” involving “less manual labor or no manual labor,” such as “something' clerical” or possibly “go[ing] back to school.” (R. 28.) Flanigan looked for a new job “for a while” but “couldn’t find any especially [because he] was trying to change fields.” (R. 28.)
Flanigan testified that his condition “deteriorated fast” beginning in December 2009, and by February 2010 “it was debilitating.” (R. 28-29, 33; see page 301 & n. 21 below.) Flanigan stated that he experiences neck pain that travels through his back and shoulder into his left hand where he suffers from nerve impingement. (R. 33.) Flanigan also stated that his neck pain causes nausea and severe headaches. (R. 31, 33.) However, the symptoms were not present to that degree in November 2008. (R. 33-34.)
Flanigan reported that he has “had asthma since [he] was young” and that his condition has been “considered COPD” for approximately “three to four years” (i.e., since January 2008 or 2009). (R. 34.) Flanigan stated that his daily COPD symptoms include “[shortness of breath, dizziness, [and] light headedness,” which requires him “to use a nebulizer four times a day.” (R. 34-35.) Flanigan testified that because of his COPD, surgery for his neck and back pain “was a last resort,” and the pain “would have to get more severe before [his doctor] would recommend [him] doing it.” (R. 34; see R. 227-28; see also page 295 below.)
Medical Evidence Before the ALJ
2008
January 1, 2008 — October 31, 2008
On January 29, 2008, Dr. Kovoor saw Flanigan for flu symptoms and a bad cold. (Dkt. No. 13: R. 255.) On March 31, 2008, Dr. Kovoor saw Flanigan for a bad cold and sinus infection. (R. 254.) On May 30, 2008, Dr. Kovoor saw Flanigan for an earache and sore throat. (R. 253.) On July 31, 2008, Dr. Kovoor saw Flanigan for an unspecified reason. (R. 252.) On September 26, 2008, Dr. Kovoor saw Flanigan for complaints of light headedness and to check his blood pressure. (R. 251.) In his progress notes from the January, March, May and July 2008 visits, Dr. Kovoor indicated that Flanigan suffered from hypertension and asthma. (R. 252-55.)
November 1, 2008 — December 31, 2008
All of the medical records from this period relate to a right hand injury, which Flanigan candidly admits “had nothing to do with” his alleged disabling conditions. (Dkt. No. 13: R. 27; see also Dkt. No. 29-1: Flanigan Opp. Br. at 4: “The date of November 1, 2008 is the date of a report within the medical records of the treating physician, for the entire year of 2008, which was for a hand injury unrelated to the claim for disability.”)
On November 1, 2008, Flanigan was treated at the Montefiore emergency room after he fell and injured his right hand. *290(R. 261-62; see R. 200-01.) His aftercare instructions note that Flanigan was taking asthma medication (Proventil and Advair) and was given Tylenol with codeine, and that he was instructed not to return to work for one to two days, not to use his right hand and to set up an appointment at the Montefiore hand clinic. (R. 260-62.) On November 4, 2008, Flanigan had an x-ray taken of his right hand at the Montef-iore hand clinic, which showéd no fracture or dislocation. (R. 201, 203.) A November 4, 2008 note from the Montefiore hand clinic stated Flanigan “CANNOT return to work” and “[w]ill be seen again next week.” (R. 263.)
On November 7, 2008, Flanigan saw Dr. Kovoor in connection with the previous week’s hand injury, and noted that Flani-gan “want[ed] clearance for work.” (R. 242, 250.) Dr. Kovoor also noted that Flanigan was taking Advair and Chlorthal-idone to treat his asthma and hypertension, respectively. (R. 242, 250.)
2009
On February 2, 2009, Flanigan complained to Dr. Kovoor of a cough, earache, sore throat and chest congestion for three days. (R. 249.) Dr. Kovoor’s notes listed Flanigan’s' medications as Advair and Ventolin for asthma/COPD, Fioricet for migraines, and Chlorthalidone for hypertension. (R. 249.) On March 27, 2009, Flanigan saw Dr. Kovoor for a cough and bronchitis. (R. 248.) On June 26, 2009, Flanigan saw Dr. Kovoor for a cough; Dr. Kovoor diagnosed COPD exacerbation and prescribed Avelox, Albuterol, Advair and Prednisone. (R. 247.)
On June 28, 2009, Flanigan was treated at the Montefiore emergency room and was diagnosed with COPD, acute bronchitis and bacterial pneumonia. (R. 257.) His aftercare instructions show he was taking Prednisone, Albuterol, Proventil and Advair. (R. 257.) He was given prescriptions for Prednisone, Avelox, Combi-vent inhaler (Albuterol) for COPD and Sonata for insomnia, and instructed to follow up with his own doctor or return at any time if he experienced “any tr[o]uble breathing, fever, chest pain or any other ch[a]nge in condition.” (R. 256-58.)
On September 28, 2009, Dr. Kovoor saw Flanigan for COPD chest pain, back pain, aehiness, fevers and coughing with green phlegm, and diagnosed COPD. (R. 246.) In late 2009 (probably December 2009), Dr. Kovoor referred Flanigan for testing in connection with his neck and back pain and numbness in his left hand. (R. 28; see R. 210-13, 227-32.)
2010
Hudson Valley Radiology
On March 5, 2010, Flanigan underwent a cervical spine x-ray examination at Hudson Valley Radiology. (R. 212, 232.) Radiologist Dr. Donna M. Scuderi noted a history of “[n]eck pain with decreased range of motion.” (R. 212, 232.) Dr. Scuderi found “straightening of the cervical lordosis” as well as “[d]egenerative spondylosis at the C4-5 through C6-7 levels with bilateral foraminal encroachment at the C5-6 and C6-7 levels and early foraminal encroachment on the left at the C4-5 level.” (R. 212, 232.) Dr. Scuderi correlated her findings “with [an] MRI of the cervical spine dated 05/01/2002” and noted that “[t]he findings have progressed since the prior MRI of 2002.” (R. 212, 232.)
On March 11, 2010, Flanigan underwent a cervical spine MRI. (R. 210-11, 230-31.) Radiologist Dr. Joel Schwartz noted a history of “[d]isc degeneration,” and found “[d]isc degeneration involving C4-5 through C6-7, similar to the prior [ie., 3/5/10] radiographs” and “[n]eural forami-nal encroachment” most severe at C5-6 and C6-7..(R. 210-11, 230-31.)
*291
Westchester Neurological Consultants: Dr. Roshni Karnani
On March 15, 2010, Flanigan saw Dr. Roshni Karnani of Westchester Neurological Consultants for the first time. (R. 224-26.) Flanigan presented with “neck pain and numbness in the left hand,” and reported a “history of neck trauma,” which began “in 2001” when Flanigan was “carrying a pile of books, [and] fell and hit his head and neck posteriorly” while he was “working in Barnes and Nobles.” (R. 224.) Dr. Karnani noted that while Flanigan “has been through intense physical therapy 3 times over the last few years,” his symptoms have worsened “over the last 6 weeks,” in particular “the tingling in the left ha[n]d.” (R. 224.) Dr. Karnani further noted that Flanigan’s medical history included high blood pressure, neck pain, back pain, migraines and COPD. (R. 224.) Dr. Karnani found Flanigan suffered from “C6, C7, and C8 Radiculopathy.” (R. 225.)
On April 9, 2010, Flanigan underwent an electrodiagnostic study at Westchester Neurological Consultants. (R. 213, 223, 229.) Flanigan presented to Dr. Karnani “with neck pain radiating to the shoulders and hands with weakness of the left hand.” (R. 213, 223, 229.) Flanigan told Dr. Kar-nani that “[t]hese symptoms have been present for years and have been progressing.” (R. 213, 223, 229.) Dr. Karnani concluded that Flanigan’s study was abnormal, finding there was “evidence of moderate chronic C5 C6 radiculopathy bilaterally, severe chronic C7 radiculopathy bilaterally” as well as “moderate left more than right median nerve neuropathy at the wrist, most probably related to Carpal Tunnel Syndrome.” (R. 213, 223, 229.) Flanigan had follow up visits at Westches-ter Neurological Consultants on May 14, June 4, June 29, July 30, August 27 and November 9, 2010. (R. 217-22.)
Dr. Raj Murali
On August 4, 2010, Flanigan saw Dr. Raj Murali for a neurosurgical consultation. (R. 227-28.) Dr. Murali noted that Flanigan’s “chief- complaint is neck pain, midthoracic pain, weakness of the left hand, and diffuse pain in both upper limbs.” (R. 227.) Flanigan told Dr. Mura-li that his “symptoms have been present for approximately seven years,” but they have “become much worse” during “the last 15 months or so,” and that “[f]or the last few months, he has not been able to work because of worsening pain especially in the neck.” (R. 227.) Dr. Murali reviewed Flanigan’s March 2010 MRI, “which shows the presence of diffuse spon-dylosis and cord compression from C3 through C7.” (R. 227.) Dr. Murali informed Flanigan “that as the last resort he will be a candidate for cervical laminecto-my and instrumented fusion from C3 through C7,” noting that “[h]e has already had some physical therapy and pain medications without significant benefit.” (R. 227-28.) Dr. Murali instructed Flanigan to consider whether he would want the surgery, and opined that it “may benefit him from the pain and motor function point of view.” (R. 227-28.)
Montefiore Medical Center
On September 30, 2010, Flanigan was treated for neck pain at the Montefiore emergency room (R. 193-98), reporting he had experienced “years of intermittent [neck] pain” (R. 194).
On. October 30, 2010, Flanigan was treated at the Montefiore emergency room for severe neck and back pain, bronchitis and mild COPD exacerbation. (R. 179-83; see R. 184-90.) Radiologist Dr. Steven Blumer examined Flanigan and obtained a “single AP portable view of the chest.” (R. 187.) Dr. Blumer found “decreased lung volumes” and a “nodular density at the right lung base which may represent a *292vessel on end.” (R. 187.) Dr. Blumer recommended “[cjorrelation with prior chest radiographs” and noted that “further evaluation with a CT scan of the chest may be obtained as clinically indicated.” (R. 187.) Flanigan was prescribed Prednisone, Percocet and Tessalon for his cough. (R. 186.)
Dr. Kovoor’s Multiple Impairment Questionnaire
On December 2, 2010, Dr. Kovoor completed a Multiple Impairment Questionnaire at Flanigan’s counsel’s request. (Dkt. No. 13: R. 233-40.) Dr. Kovoor indicated Flanigan’s first date of treatment was February 3, 2010, and diagnosed cervical pain, disc degeneration at C3-C7, carpal tunnel syndrome of the left hand secondary to disc degeneration, spondylo-sis and spinal cord compression. (R. 233.) Dr. Kovoor noted a “fair” prognosis if Flanigan underwent surgery. (R. 233.) Dr. Kovoor listed COPD as one of the clinical findings supporting his diagnosis, and noted that Flanigan had “stopped smoking” but was “still having intermittent flare ups.” (R. 233-34.)
Dr. Kovoor indicated that during an eight-hour day, Flanigan could stand or walk for two hours at a time and could sit for eight hours with fifteen minute breaks every hour. (R. 235-36.) Dr. Kovoor noted Flanigan could never lift, carry, grasp, turn or twist any objects of any weight, and could never reach his arms of use his hands for fine manipulations. (R. 236-37.) Dr. Kovoor opined that Flanigan’s symptoms would interfere with his ability to look up at a computer or down at a desk, cause him to miss work more than three times per month, and likely increase if he were placed in a competitive environment. (R. 237, 239.) Dr. Kovoor found these marked limitations consistent with Flani-gan’s impairments. (R. 234.) Last, Dr. Kovoor stated that “the earliest date that the description of symptoms and limitations in this questionnaire appliefd]” was March 2009. (R. 239.)
2011 & 2012
On February 12, 2011, Flanigan was treated at the Montefiore emergency room for COPD exacerbation and prescribed Augmentin, Prednisone and Percocet. (Dkt. No. 13: R. 156-77.)
In two letters dated December 8, 2011 and February 15, 2012, Dr. Kovoor stated that Flanigan, who he has treated since 2004, “suffers from cervical radiculopathy and neck pain and left upper extremity weakness,” and noted that Flanigan’s “above complaints have been present since Nov 2008.” (R. 153, 244.) Dr. Kovoor opined that Flanigan’s “injury is not new,” citing his March 2010 MRI and “prior imaging for his cervical and thoracic spine with his previous doctors.” (R. 153, 244.) Dr. Kovoor found that Flanigan’s condition “is likely progressive and permanent,” “limits him from performing work of any kind,” and renders Flanigan “fully disabled.” (R. 153, 244.)2
ALJ Gonzalez’s Decision
On April 12, 2012, ALJ Gonzalez issued a written decision denying Flanigan’s application for DIB and SSI benefits. (Dkt. No. 13: R. 10-17.) ALJ Gonzalez applied the appropriate five-step analysis, considering Flanigan’s testimony and the medical record. (R. 14-17.) At the first step, ALJ Gonzalez found that Flanigan “did not en*293gage in substantial gainful activity during the period from his alleged onset date of November 1, 2008 through his date last insured of December 31, 2008.” (R. 15.)
At the second step, ALJ Gonzalez found that, “[t]hrough the date last insured, there were no medical signs or laboratory findings to substantiate the existence of a medically determinable impairment.” (R. 15'.) Specifically, “there was no evidence of any diagnostic testing or objective clinical findings by treating or examining sources that supported any medically determinable impairment on or before December 31, 2008, the claimant’s date last insured.” (R. 16.) ALJ Gonzalez noted that Flanigan’s request to return to work on November 7, 2008 was inconsistent with a November 1, 2008 disability onset. (R. 16.) ALJ Gonzalez found that Dr. Kov-oor’s December 8, 2011 and February 15, 2012 letters — stating that Flanigan’s cervical radiculopathy, neck pain and left upper extremity weakness “complaints have been present since November] 2008” (see page 292 above) — were not entitled to any weight, since “those complaints were not substantiated by any diagnostic findings at the time” and because “that claim is not supported by [Dr. Kovoor’s] own treatment notes.” (R. 16.) Additionally, ALJ Gonzalez found that Dr. Kovoor’s December 2, 2010 opinion set forth in the Multiple Impairment Questionnaire also was not entitled to any weight since it “only referenced a period outside the relevant period,” i.e., to March 2009. (R. 16.) ALJ Gonzalez thus found that “a medically determinable impairment could not be established from [Flanigan’s] alleged onset date through his date last insured” and concluded that Flanigan was not disabled. (R. 16-17.)
On April 16, 2013, the Appeals Council denied Flanigan’s request for review of ALJ Gonzalez’s decision and it became the Commissioner’s final decision. (R. 1-4.) Flanigan’s Opposition and Additional Evidence3
Preliminarily, Flanigan argues that the ALJ erroneously based his decision on a November 1, 2008 onset date. (Dkt. No. 29-1: Flanigan Opp. Br. at 4-6.) Flanigan asserts he originally estimated November 1, 2008 “was the last date that [he] was able to work,” but he thought the exact date “would have to be verified anyway.” (Flanigan Opp. Br. at 5.) Flanigan states that “December 8, 2008, is the actual date that [he] could no longer work due to the medical conditions listed regarding [his] neck, spine.” (Flanigan Opp. Br. at 5; Dkt. No. 19-3: Flanigan Opp. Br. at 17; Dkt. No. 19: Flanigan Opp. Att. at 11: 12/6/13 Email.) Flanigan argues that the ALJ’s acceptance of an erroneous onset date “was the cause of devastating consequences to [his] case, including the ALJ questioning why I requested a note for clearance to return to work after the inju*294ry if I was already disabled, leading the ALJ to question my character and integrity.” (Flanigan Opp. Br. at 4.)
Relatedly, Flanigan argues that some medical evidence could not be obtained because it was prohibitively expensive. As to the absence of contemporaneous records, Flanigan asserts that he could not afford diagnostic testing during the relevant period because he “had no health insurance at the time, and had to wait approximately three months to obtain Medicaid.” (Flanigan Opp. Br. at 5.) Flanigan states that he chose to see Dr. Kovoor on November 7, 2008 while he was uninsured because he felt “that [his] condition was serious enough ... even though [he] had to pay in cash for the visit and any medication that [he] was able to afford that was prescribed at the time.” (Flanigan Opp. Br. at 19.) Flanigan similarly asserts that he was unable to afford the $750 fee to obtain a narrative report from his treating neurologist Dr. Karnani. (Flanigan Opp. Br. at 12.)4
Flanigan’s primary argument is that ALJ Gonzalez failed to comply with the treating physician rule and duty to develop the record when he erroneously “focused on a very short, specific time period and not the overall medical record,” “failed to obtain or attempt to obtain the records of other physicians identified within the case,” and failed to seek clarification regarding Dr. Kovoor’s retrospective diagnosis letter. (See Flanigan Opp. Br. at 6-12; Dkt. No. 19-3: Flanigan Opp. Br. at 18-19.) Flanigan argues that a full picture of his medical history reveals the progressive deterioration of his “conditions of the spine as well as [his] diagnosis and the severity of [his] COPD,” and all of his records should have been “taken together in consideration for disability” by ALJ Gonzalez. (Flanigan Opp. Br. at 6, 9-14.)
In particular, Flanigan argues that a finding of disability during the relevant period is supported by a comparison of his 2010 and 2002 diagnostic tests (Flanigan Opp. Br. at 5-6), as referenced in Dr. Scuderi’s March 5, 2010 cervical spine x-ray report indicating that “[t]he findings have progressed since the prior MRI of 2002” (R. 212, 232). Flanigan attaches records reflecting cervical spine, thoracic spine and lumbar spine MRIs that were taken on May 1, October 30 and November 8, 2002, respectively. (Dkt. No. 19-2: Flanigan Opp. Att. at 9 & Dkt. No. 19-4: Flanigan Opp. Atts. at 10-12: 5/2/02, 10/30/02 & 11/8/02 MRI Reports.) The May 2002 cervical spine MRI showed “[m]ultilevel disc degeneration,” prominent bulges at C5-C6 and C6-C7 and a “suggestion of nerve root compromise bilaterally at those two levels.” (Dkt. No. 19-2: Flanigan Opp. Att. at 9: 5/2/02 MRI Report.) The October 2002 thoracic spine MRI showed “[c]entral herniation at T5-T6” and “[m]ultilevel disc disease.” (Dkt. No. 19-4: Flanigan Opp. Att. at 10-11: 10/30/02 MRI Report.) The November 2002 lumbar spine MRI showed “no evidence of a herniated disc” nor of central spinal or lateral recess stenosis. (Dkt. No. 19-4: Flanigan Opp. Att. at 12: 11/8/02 MRI Report.)
Similarly, Flanigan argues that ALJ Gonzalez erred by failing to “take[] into account that the injury that [Flanigan] sustained when [he] went on Worker’s Compensation had a connection' with the deterioration of [his] spine years later,” noting that “[n]one of the medical reports from that period of time (worker’s compensation) seemed to be connected by the ALJ *295to [his] current condition for the spine.” (Flanigan Opp. Br. at 18; see Dkt. No. 19-1: Flanigan Opp. Att. at 21-22: N.Y. Workers’ Compensation Bd. Notice of Decision, reflecting payments from 4/1/03-3/18/05.)
Flanigan also states that the COPD noted in his 2009 medical records {see page 290 above) was “not a new diagnosis,” but rather was simply an indication that he continued to suffer from COPD, which first was diagnosed in 1996. (Flanigan Opp. Br. at 8-9, 11.) In support, Flanigan attaches a doctor’s note dated September 20, 1996 stating that Flanigan “continues to have chronic asthma with daily symptoms.” (Dkt. No. 19-1: Flanigan Opp. Att. at 17: 9/20/96 Note.) Flanigan also states that Dr. Kovoor has been treating his COPD since he became a patient in 2004 (Dkt. No. 19-3: Flanigan Opp. Br. at 18), and attaches an October 26, 2004 progress note from Dr. Kovoor reflecting treatment for COPD (Dkt. No. 19-3: Flanigan Opp. Att. at 20: 10/26/04 Note).
Finally, Flanigan alleges that ALJ Gonzalez erroneously “failed to obtain or attempt to obtain the records of other physicians identified within the case,” and refers specifically to Dr. Karnani’s April. 9, 2010 examination report as reflecting an incomplete depiction of what was actually ongoing treatment with Dr. Karnani. (Flani-gan Opp. Br. at 12; see R. 213, 229.) Flanigan likewise argues that ALJ Gonzalez should have contacted Dr. Murali regarding the August 4, 2010 report indicating surgery as a last resort, because he could have elaborated on the recommendation and explained “that the severity of [Flanigan’s] COPD is such that [Dr. Mura-li] was not confident that [Flanigan] could survive an approximate five hour operation, nor recover fully,” particularly since Flanigan hád been taking Prednisone to treat his COPD. (Flanigan Opp. Br. at 12-14.)
ANALYSIS
I. THE APPLICABLE LAW
A. Defínition Of Disability
A person is considered disabled for Social Security benefits purposes when he is unable “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. §§ 423(d)(1)(A), 1382c(a)(8)(A); see, e.g., Barnhart v. Thomas, 540 U.S. 20, 23, 124 S.Ct. 376, 379, 157 L.Ed.2d 333 (2003); Barnhart v. Walton, 535 U.S. 212, 214, 122 S.Ct. 1265, 1268, 152 L.Ed.2d 330 (2002); Impala v. Astrue, 477 Fed.Appx. 856, 857 (2d Cir.2012).5
An individual shall be determined to be under a disability only if [the combined effects of] his physical or mental impairment or impairments are of such severity that he is not only unable to do his *296previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work.
42 U.S.C. §§ 423(d)(2)(A)-(B), 1382c(a)(3)(B), (G); see, e.g., Barnhart v. Thomas, 540 U.S. at 23, 124 S.Ct. at 379; Barnhart v. Walton, 535 U.S. at 218, 122 S.Ct. at 1270; Salmini v. Comm’r of Soc. Sec., 371 Fed.Appx. at 111; Betances v. Comm’r of Soc. Sec., 206 Fed.Appx. at 26; Butts v. Barnhart, 388 F.3d at 383; Draegert v. Barnhart, 311 F.3d at 472.6
In determining whether an individual is disabled for disability benefit purposes, the Commissioner must consider: “(1) the objective medical facts; (2) diagnoses or medical opinions based on such facts; (3) subjective evidence of pain or disability testified to by the claimant or others; and (4) the claimant’s educational background, age, and work experience.” Mongeur v. Heckler, 722 F.2d 1033, 1037 (2d Cir.1983) (per curiam).7
B. Standard Of Review
A court’s review of the Commissioner’s final decision is limited to determining whether there is “substantial evidence” in the record as a whole to support such determination. E.g., 42 U.S.C. § 405(g); Giunta v. Comm’r of Soc. Sec., 440 Fed.Appx. 53, 53 (2d Cir.2011); Green-Younger v. Barnhart, 335 F.3d 99, 105-06 (2d Cir.2003).8 “ ‘Thus, the role of the district court is quite limited and substantial deference is to be afforded the Commissioner’s decision.’ ” Morris v. Barnhardt, 02 Civ. 0377, 2002 WL 1733804 at *4 (S.D.N.Y. July 26, 2002) (Peck, M.J.).9
The Supreme Court has defined “substantial evidence” as “ ‘more than a mere scintilla [and] such relevant evidence as a reasonable mind might accept as ade*297quate to support a conclusion.’ ” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971); accord, e.g., Sellan v. Astrue, 708 F.3d 409, 417 (2d Cir.2013); Rosa v. Callahan, 168 F.3d at 77; Tejada v. Apfel, 167 F.3d at 773-74.10 “[F]actual issues need not have been resolved by the [Commissioner] in accordance with what we conceive to be the preponderance of the evidence.” Rutherford v. Schweiker, 685 F.2d 60, 62 (2d Cir.1982), cert. denied, 459 U.S. 1212, 103 S.Ct. 1207, 75 L.Ed.2d 447 (1983). The Court must be careful not to “ ‘substitute its own judgment for that of the [Commissioner], even if it might justifiably have reached a different result upon a de novo review.’ ” Jones v. Sullivan, 949 F.2d 57, 59 (2d Cir.1991).11
The Court, however, will not defer to the Commissioner’s determination if it is “ ‘the product of legal error.’ ” E.g., Duvergel v. Apfel, 99 Civ. 4614, 2000 WL 328593 at *7 (S.D.N.Y. Mar. 29, 2000) (Peck, M.J.); see also, e.g., Douglass v. Astrue, 496 Fed.Appx. 154, 156 (2d Cir.2012); Butts v. Barnhart, 388 F.3d 377, 384 (2d Cir.2004), amended on other grounds, 416 F.3d 101 (2d Cir.2005); Tejada v. Apfel, 167 F.3d at 773 (citing cases).
The Commissioner’s regulations set forth a five-step sequence to be used in evaluating disability claims. 20 C.F.R. §§ 404.1520, 416.920; see, e.g., Barnhart v. Thomas, 540 U.S. 20, 24-25, 124 S.Ct. 376, 379-80, 157 L.Ed.2d 333 (2003); Bowen v. Yuckert, 482 U.S. 137, 140, 107 S.Ct. 2287, 2291, 96 L.Ed.2d 119 (1987). The Supreme Court has articulated the five steps as follows:
Acting, pursuant to . its statutory rule-making authority, the agency has promulgated regulations establishing a five-step sequential evaluation process to determine disability. If at any step a finding of disability or non-disability can be made, the SSA will not review the claim further. [1] At the first step, the agency will find nondisability unless the claimant shows that he is not working at a “substantial gainful activity.” [2] At step two, the SSA will find nondisability unless the claimant shows that he has a “severe impairment,” defined as “any impairment or combination of impairments which significantly limits [the claimant’s] physical or mental ability to do basic work activities.” [3] At step three, the agency determines whether the impairment which enabled the claimant to survive step two is on the list of impairments presumed severe enough to render one disabled; if so, the claimant qualifies. [4] If the claimant’s impairment is not on the list, the inquiry proceeds to step four, at which the SSA assesses whether the claimant can do his previous work; unless he shows that he cannot, he is determined not to be disabled. [5] If the claimant survives the fourth stage, the fifth, and final, step requires the SSA to consider so-called “vocational factors” (the claimant’s age, education, and past work experience), and to determine whether the claimant is capable of performing other jobs existing in significant numbers in the national economy.
Barnhart v. Thomas, 540 U.S. at 24-25, 124 S.Ct. at 379-80 (fns. & citations omit*298ted); accord, e.g., Talavera v. Astrue, 697 F.3d 145, 151 (2d Cir.2012); Rosa v. Callahan, 168 F.3d at 77; Tejada v. Apfel, 167 F.3d at 774.12
The claimant bears the burden of proof as to the first four steps; if the claimant meets the burden of proving that he cannot return to his past work, thereby establishing a prima facie case, the Commissioner then has the burden of proving the last step, that there is other work the claimant can perform considering not only his medical capacity but also his age, education and training. See, e.g., Barnhart v. Thomas, 540 U.S. at 25, 124 S.Ct. at 379-80.13
C. The Treating Physician Rule
The “treating physician’s rule” is a series of regulations set forth by the Commissioner in 20 C.F.R. § 404.1527 detailing the weight to be accorded a treating physician’s opinion. Specifically, the Commissioner’s regulations provide that:
If we find that a treating source’s opinion on the issue(s) of the nature and severity of your impairment(s) is well-supported by medically acceptable clinical and laboratory diagnostic techniques and is not inconsistent with the other substantial evidence in your case record, we will give it controlling weight.
20 C.F.R. § 404.1527(d)(2); see, e.g., Rugless v. Comm’r of Soc. Sec., 548 Fed.Appx. 698, 699-700 (2d Cir.2013); Meadors v. Astrue, 370 Fed.Appx. 179, 182 (2d Cir.2010); Colling v. Barnhart, 254 Fed.Appx. 87, 89 (2d Cir.2007); Lamorey v. Barnhart, 158 Fed.Appx. 361, 362 (2d Cir.2006).14
Further, the regulations specify that when controlling weight is not given a treating physician’s opinion (because it is not “well supported” by other medical evidence), the ALJ must consider the following factors in determining the weight to be given such an opinion: (1) the length of the treatment relationship and the frequency of examination; (2) the nature and extent of the treatment relationship; (3) the evidence that supports the treating physician’s report; (4) how consistent the treating physician’s opinion is with the record as a whole; (5) the specialization of the physician in contrast to the condition being treated; and (6) any other factors which may be significant. 20 C.F.R. § 404.1527(d)(2)-(6); see, e.g., Cichocki v. Astrue, 534 Fed.Appx. 71, 74 (2d Cir.2013); Gunter v. Comm’r of Soc. Sec., 361 Fed.Appx. 197, 197 (2d Cir.2010); Foxman v. Barnhart, 157 Fed.Appx. at 346-47; Hal-*299loran v. Barnhart, 362 F.3d at 32; Shaw v. Chater, 221 F.3d at 134; Clark v. Comm’r of Soc. Sec., 143 F.3d at 118; Schaal v. Apfel, 134 F.3d at 503.15
When a treating physician provides a favorable report, the claimant “is entitled to an express recognition from the [ALJ or] Appeals Council of the existence of [the treating physician’s] favorable ... report and, if the [ALJ or] Council does not credit the findings of that report, to an explanation of why it does not.” Snell v. Apfel, 177 F.3d 128, 134 (2d Cir.1999); see, e.g., Cichocki v. Astrue, 534 Fed.Appx. at 75; Zabala v. Astrue, 595 F.3d 402, 409 (2d Cir.2010) (ALJ’s failure to consider favorable treating physician evidence ordinarily requires remand pursuant to Snell but does not require remand where the report was “essentially duplicative of evidence considered by the ALJ”); Ferraris v. Heckler, 728 F.2d 582, 587 (2d Cir.1984) (“We of course do not suggest that every conflict in a record be reconciled by the ALJ or the Secretary, but we do believe that the crucial factors in any determination must be set forth with sufficient specificity to enable [reviewing courts] to decide whether the determination is supported by substantial evidence.” (citations omitted)); Ramos v. Barnhart, 02 Civ. 3127, 2003 WL 21032012 at *7, *9 (S.D.N.Y. May 6, 2003) (The ALJ’s “ ‘failure to mention such [treating physician report] evidence and set forth the reasons for his conclusions with sufficient specificity hinders [this Court’s] ability ... to decide whether his determination is supported by substantial evidence.’ ”).
The Commissioner’s “treating physician” regulations were approved by the Second Cireuit in Schisler v. Sullivan, 3 F.3d 563, 568 (2d Cir.1993).
D. The ALJ’s Duty to Develop the Record
It is the “well-established rule in [the Second] circuit” that the ALJ must develop the record, even where, as here, the claimant was represented by counsel:
Even when a claimant is represented by counsel, it is the well-established rule in our circuit “that the social security ALJ, unlike a judge in a trial, must on behalf of all claimants ... affirmatively develop the record in light of the essentially nonadversarial nature of a benefits proceeding.” Lamay v. Comm’r of Soc. Sec., 562 F.3d 503, 508-09 (2d Cir.2009) (internal quotation marks and brackets omitted) [, cert. denied, 559 U.S. 962, 130 S.Ct. 1503, 176 L.Ed.2d 152 (2010) ]; accord Butts v. Barnhart, 388 F.3d 377, 386 (2d Cir.2004), [amended on other grounds], 416 F.3d 101 (2d Cir.2005); Pratts v. Chater, 94 F.3d 34, 37 (2d Cir.1996); see also Gold v. Sec’y of Health, Educ. & Welfare, 463 F.2d 38, 43 (2d Cir.1972) (pro se claimant). Social Security disability determinations are “investigatory, or inquisitorial, rather than adversarial.” Butts, 388 F.3d at 386 (internal quotation marks omitted). “[I]t is the ALJ’s duty to investigate and develop the facts and develop the arguments both for and against the granting of benefits.” Id. (internal quotation marks omitted); accord Tejada v. Apfel, 167 F.3d 770, 774 (2d Cir.1999).
Moran v. Astrue, 569 F.3d 108, 112-13 (2d Cir.2009).16
*300II. APPLICATION OF THE FIVE-STEP SEQUENCE TO FLANI-GAN’S CLAIM
A. Flanigan Was Not Engaged In Substantial Gainful Activity
The first inquiry is whether Flanigan was engaged in substantial gainful activity after his application for SSI benefits. “Substantial gainful activity” is defined as work that involves “doing significant and productive physical or mental duties” and “[i]s done (or intended) for pay or profit.” 20 C.F.R. § 404.1510.
ALJ Gonzalez concluded that Flanigan “did not engage in substantial gainful activity during the period from his alleged onset date of November 1, 2008 through his date last insured of December 31, 2008.” (Dkt. No. 13: R. 15; see page 293 above.) In connection with his opposition argument that the ALJ failed to establish the correct onset date, Flanigan submitted an email from Burlington Coat Factory showing that Flanigan worked until December 8, 2008. (Dkt. No. 19: Flanigan Opp. Att. at 11: 12/6/13 Email; see page 293 above.) Nevertheless, because ALJ Gonzalez’s conclusion that Flanigan did not engage in substantial gainful activity during the relevant period benefits Flanigan at the first step, the Court proceeds to the second step of the five-step analysis.
B. Flanigan Did Not Demonstrate “Severe” Medically Determinable Impairments That Significantly Limited His Ability To Do Basic Work Activities
The second step of the analysis is to determine whether Flanigan proved that he had a severe impairment or combination of impairments that “significantly limit[ed his] physical or mental ability to do basic work activities.” 20 C.F.R. § 404.1521(a). The ability to do basic work activities is defined as “the abilities and aptitudes necessary to do most jobs.” 20 C.F.R. § 404.1521(b). “Basic work activities” include:
walking, standing, sitting, lifting, pushing, pulling, reaching, carrying, or handling ... seeing, hearing, and speaking ... [understanding, carrying out, and remembering simple instructions ... [u]se of judgment ... [Responding appropriately to supervision, co-workers and usual work situations ... [d]ealing with changes in a routine work setting.
20 C.F.R. § 404.1521(b)(1)-(6). The Second Circuit has warned that the step two analysis may not do more than “screen out de minimis claims.” Dixon v. Shalala, 54 F.3d 1019, 1030 (2d Cir.1995). “[T]he ‘mere presence of a disease or impairment, or establishing that a person has been diagnosed or treated for a disease or impairment’ is not, by itself, sufficient to render a condition ‘severe.’ ” McDowell v. Colvin, No. 11-CV-1132, 2013 WL 1337152 at *6 (N.D.N.Y. Mar. 11, 2013), report & rec. adopted, 2013 WL 1337131 (N.D.N.Y Mar. 29, 2013).17
*301“A finding that a condition is not severe means that the plaintiff is not disabled, and the Administrative Law Judge’s inquiry stops at the second level of the five-step sequential evaluation process.” Rosario v. Apfel, No. 97 CV 5759, 1999 WL 294727 at *5 (E.D.N.Y. Mar. 19, 1999). On the other hand, if the disability claim rises above the de minimis level, then the further analysis of step three and beyond must be undertaken. See, e.g., Dixon v. Shalala, 54 F.3d at 1030.
“A finding of ‘not severe’ should be made if the medical evidence establishes only a ‘slight abnormality’ which would have ‘no more than a minimal effect on an individual’s ability to work.’ ” Rosario v. Apfel, 1999 WL 294727 at *5 (quoting Bowen v. Yuckert, 482 U.S. 137, 154 n. 12, 107 S.Ct. 2287, 2298 n. 12, 96 L.Ed.2d 119 (1987)).
1. Substantial Evidence Supports ALJ Gonzalez’s Finding That Flanigan Did Not Demonstrate Severe Medically Determinable Impairments Prior To His December 31, 2008 Date Last Insured
ALJ Gonzalez determined that because “there were no medical signs or laboratory findings to substantiate the existence of a medically determinable impairment through December 31, 2008, the date last insured,” Flanigan “must be found not disabled at step 2 of the sequential evaluation process (SSR 96-4p).” (R. 15-16; see page 292 above.)18 ALJ Gonzalez found that “the medical record was absent objective findings or evidence of treatment prior to December 31, 2008 or within a period of substantial proximity to [Flanigan’s] date last insured,” and thus “concluded that a medically determinable impairment could not be established from [Flanigan’s] alleged onset date through his date last insured.” (R. 16; see pages 292-93 above.)
*302Contrary to establishing the existence of a severe impairment before December 31, 2008, at best the evidence shows that Flanigan experienced progressively worsening symptoms that eventually became disabling sometime in 2009 at the earliest. In a December 2010 Multiple Impairment Questionnaire, Dr. Kovoor indicated that March 2009 was the earliest date that Flanigan’s disabling limitations applied. (R. 239; see page 292 above.) Further, Dr. Kovoor’s contemporaneous progress notes reflect that he saw Flanigán ten times in 2008 and 2009, and there is no indication of a back or neck condition until September 28, 2009, when Flanigan complained of back pain and achiness. (See pages 289-90 above.)19 Dr. Kovoor also did not refer Flanigan for diagnostic testing until sometime between December 2009 and March 2010 (see R. 28), with the earliest objective medical findings produced by those tests being from March and April 2010 (see pages 290-91 above).20
ALJ Gonzalez’s conclusion also is supported by Flanigan’s own statements and testimony. On March 15, 2010, Flanigan reported to Dr. Karnani that “over the last 6 weeks, the tingling in the left ha[n]d has gotten worse.” (See page 290 above.) Likewise, on August 4, 2010, Flanigan reported to Dr. Murali that “in the last 15 months or so, he has become much worse.” (See page 291 above.) Additionally, during the hearing, Flanigan reiterated several times that his condition did not worsen to its present state until approximately December 2009,21 and that he would have *303been capable of performing “clerical” work or “go[ing] back to school” in December 2008 when he first- left his manual labor job (see page 289 above).
Accordingly, ALJ Gonzalez’s determination is supported by substantial evidence (or rather the absence of medical evidence during the November-December 2008 period in issue). See, e.g., Swainbank v. Astrue, No. 06-CV-248, 2008 WL 731302 at *1-3 (D.Vt. Mar. 18, 2008) (“The plaintiff has the burden of demonstrating that she suffered from a disabling impairment on or before December 31, 1984, when her insured status expired.... In order for the plaintiff to meet her burden she must show that the impairment was medically determinable and significantly limited her ability to perform basic work activities. Social Security regulations require that when there is no medically determinable impairment, that is, an impairment verified by medical signs or laboratory findings, the application must be denied at step 2 of the sequential evaluation process because there is no severe impairment.... The first note in the record indicating a complaint of a sleep problem was in October 1992, almost eight years after the expiration of plaintiffs insured status.... [A] test in 2003 identified sleep apnea. This was the first time that a medical test demonstrated a severe sleeping impairment. ... [A]s noted above, the medical records during the relevant period fail to show that plaintiff complained of a sleep problem.... The administrative law judge ... correctly summarized the issue in this case: ‘Thus, regardless of how genuine the claimant’s complaints may appear to be, when there are no medical signs or laboratory findings to substantiate the existence of a medically determinable physical or mental impairment that could reasonably be expected to produce the claimant’s symptoms, a finding of not disabled is required at step two of the sequential evaluation process.’ The Court finds that the decision of the Commissioner is supported by substantial evidence.... ” (citations & emphasis omitted)), aff'd, 356 Fed.Appx. 545 (2d Cir.2009); see also, e.g., Jones v. Astrue, No. 09-CV-1232, 2012 WL 1605566 at *7 (N.D.N.Y. Apr. 17, 2012) (“[T]he ALJ’s sequential evaluation ended at step two, with the (adequately supported) conclusion that there were no medical signs or laboratory findings to substantiate the existence of a medically determinable impairment on or before December 31, 2001.... This Court finds no error with respect to this aspect of the ALJ’s decision.”), report & rec. adopted, 2012 WL 1605593 (N.D.N.Y. May 8, 2012).
2. ALJ Gonzalez’s Decision To Afford No Weight To Dr. Kovoor’s Retrospective Opinions Did Not Constitute Reversible Legal Error
In making his determination that Flanigan failed to establish a severe medically determinable impairment during the relevant period, ALJ Gonzalez concluded that Dr. Kovoor’s December 2, 2010 and February 15, 2012 opinions were not entitled to any weight. (Dkt. No. 13: R. 16; see page 292 above.) First, Dr. Kovoor’s December 2, 2010 Multiple Impairment Questionnaire does not support the existence of a medically determinable impairment before December 31, 2008; Dr. Kovoor opined that the symptoms and limitations described therein applied no earlier than March 2009, a date outside of Flanigan’s insured period. (R. 239; see page 292 above.) Thus, ALJ Gonzalez properly decided not to give the opinion weight, since it “only referenced a period outside the relevant period.” (R. 16; see *304page 292 above.) See, e.g., Papp v. Comm’r of Soc. Sec., 05 Civ. 5695, 2006 WL 1000397 at *15 (S.D.N.Y. Apr. 18, 2006) (Peck, M.J.) (“The reports that [the doctor] prepared on July 15, 2002 and June 25, 2003 describe [claimant’s] symptoms as of those dates, which are well after [the claimant’s] June 30, 2001 last insured date, and therefore they are irrelevant to this analysis'.”); Dailey v. Barnhart, 277 F.Supp.2d 226, 233 n. 14 (W.D.N.Y.2003) (“Medical opinions given after the date that [the claimant’s] insured status expired are taken into consideration if such opinions are relevant to her condition prior to that date. ” (emphasis added)); see also, e.g., Dominick v. Bowen, 861 F.2d 1330, 1333 (5th Cir.1988) (SSA properly disregarded evidence of post-insured status mental disorders); Tecza v. Astrue, Civ. A. No. 08-242, 2009 WL 1651536 at *10 (W.D.Pa. June 10, 2009) (The doctor’s “opinions ... were generated well after the Plaintiffs insured status expired (thirteen months and twenty months respectively), are temporally remote from the Plaintiffs date last insured and do not address the Plaintiffs level of functioning during the relevant time period. Given the content and remoteness of these opinions, they have no relevance to the Plaintiffs condition prior to the expiration of his insured status.” (collecting cases)); Acosta v. Barnhart, 99 Civ. 1355, 2003 WL 1877228 at *12-13 (S.D.N.Y. Apr. 10, 2003) (Peck, M.J.) (although medical reports from June 1998 definitively showed that claimant was disabled, those reports did not show that claimant was disabled prior to his last insured date of December 31, 1995).
Second, Dr. Kovoor’s February 15, 2012 letter stated that Flanigan “suffers from cervical radiculopathy and neck pain and left upper extremity weakness” and that “[h]is above complaints have been present since Nov 2008.” (R. 244; see page 292 above.) ALJ Gonzalez found that because the complaints referenced in Dr. Kovoor’s letter “were not substantiated by any diagnostic findings at the time,” his opinion was not entitled to any weight “as it [was] not supported by medical signs and laboratory findings showing that the claimant has a medical impairment which could reasonably produce the pain and limitations alleged.” (R. 16; see page 292 above.)
As an initial matter, even assuming ar-guendo that there was evidentiary support for Dr. Kovoor’s retrospective onset statements — i.e., that Flanigan’s “complaints have been present since Nov 2008” and that “he continued to have cervical symptoms with pain” between September 2008 and March 2009 — those statements substantiate only that the conditions or symptoms existed in 2008, but not necessarily that they were as severe and disabling in 2008 as they had become by the time Dr. Kovoor prepared the February 2012 letter. See, e.g., Ratliff v. Barnhart, 92 Fed.Appx. 838, 840 (2d Cir.2004); Salvaggio v. Apfel, 23 Fed.Appx. 49, 50-51 (2d Cir.2001) (“Our independent review of the record reveals that the plaintiff did suffer from multiple sclerosis beginning as early as 1989. However, we find substantial evidence supporting the ALJ’s finding that prior to 1989 the nature of the plaintiffs symptoms cannot be established from independent sources. We conclude that this lack of independent medical evidence, the result of the plaintiffs choice to seek only minimal medical attention for her symptoms prior to 1989, supports the finding that the plaintiff was not under a disability as defined by the Social Security Act at any time prior to the time her insured status expired.”); Roy v. Apfel, No. 99-6153, 201 F.3d 432 (table), 1999 WL 1295361 at *2 (2d Cir. Dec. 22, 1999) (“The issue here is whether appellant’s disability constituted a ‘severe impairment’ as of June 30, 1977. *305Thus, even assuming that her depression began at some point prior to June 30,1977, that does not suffice to prove that the depression was a severe impairment as of that date.”).22
Moreover, the major problem with Flanigan’s claim that ALJ Gonzalez violated the treating physician rule is that while Dr. Kovoor opined in February 2012 that Flanigan’s impairments were present in 2008, he gave no basis for his conclusion and, apparently, did not refer Flanigan to a specialist for diagnostic testing until early 2010. (See pages 290-91 above.) The ALJ’s determination to give no weight to Dr. Kovoor’s ipse dixit after the fact opinion was not erroneous. See, e.g., Ratliff v. Barnhart, 92 Fed.Appx. at 840 (“Although the ALJ is normally obligated to give the treating physician’s opinion controlling weight, where that opinion is not supported by medical evidence or is contra-dieted by other substantial evidence in the record, the ALJ is entitled to use discretion in weighing the medical evidence as a whole.”); Taylor v. Barnhart, 83 Fed.Appx. 347, 349 (2d Cir.2003) (same); Veino v. Barnhart, 312 F.3d 578, 588 (2d Cir.2002) (“While the opinions of a treating physician deserve special respect, they need not be given controlling weight where they are contradicted by other substantial evidence in the record.” (citations omitted)).
This is particularly true where, as here, “there is medical evidence in the record that contradicts the retrospective opinions of’ Dr. Kovoor, Roy v. Apfel, 1999 WL 1295361 at *3, including his own contemporaneous treatment records. As described above, Flanigan saw Dr. Kovoor ten times in 2008 and 2009 but only complained of back pain for the first time on September *30628, 2009 (see page 302 above), which is consistent with Flanigan’s statements and testimony about the deterioration of his condition beginning in late 2009 and causing total debilitation by February 2010 (see page 302 & n. 21 above). See, e.g., Monette v. Astrue, 269 Fed.Appx. 109, 113 (2d Cir.2008) (“no error in the ALJ’s refusal to accord [treating physician’s] retrospective opinion significant weight because there is substantial evidence that the opinion is contradicted by other evidence,” including “[n]on-medical evidence” and medical “assessments [that] are far more contemporaneous assessments of [claimant’s] condition than [treating physician’s] retrospective conclusion”); Roy v. Apfel, 1999 WL 1295361 at *3 (Treating physician’s “letter was properly discounted because it is quite vague, contradicts his prior letter that mentions only appellant’s ‘deep vein thrombosis ... and pulmonary embolus’ during the relevant time period, and is not supported by ‘medically acceptable clinical and laboratory diagnostic techniques.’ ”); O’Connor v. Shalala, No. 96-6215, 111 F.3d 123 (table), 1997 WL 165381 at *1 (2d Cir. Mar. 31, 1997) (“Rather than being ‘well-supported by medically-aceeptable clinical and laboratory diagnostic techniques,’ [treating doctor’s] opinion was speculative, and was contradicted by substantial other evidence, including contradictory evidence of [claimant’s] social interactions during the relevant period, and the absence of any contemporaneous evidence of the existence of a psychiatric impairment. In determining the existence of a disability, the Commissioner is also entitled to rely on the absence of contemporaneous evidence of the disability. The Commissioner’s conclusion that [claimant] was not suffering from a mental impairment prior to September 30, 1992, was not based on legal error and was supported by substantial evidence.” (citations omitted)).23
Given the substantial evidence establishing that Flanigan’s condition had not become a medically determinable severe impairment before December 31, 2008, ALJ Gonzalez was not required to contact Dr. Kovoor in order to satisfy the duty to develop the record. See, e.g., Micheli v. Astrue, 501 Fed.Appx. 26, 29-30 (2d Cir.2012) (“The mere fact that medical evidence is conflicting or internally inconsistent does not mean that an ALJ is required to re-contact a treating physician. Rather, because it is the sole responsibility of the ALJ to weigh all medical evidence and resolve any material conflicts in the record where the record provides sufficient evidence for such a resolution, the ALJ will weigh all of the evidence and see whether it can decide whether a claimant is disabled based on the evidence he has, even when that evidence is internally inconsistent. Here, the ALJ properly determined that he could render a decision based on the 500-page record already before him despite the discrepancies in [treating physician’s] assessment.” (citations omitted)).24 The adequacy of ALJ *307Gonzalez’s development of the record is further evidenced by his statements during the hearing regarding the completeness of medical files and his willingness to leave the record open and receive supplemental evidence, which he did. (See page 288 above.). See, e.g., Gonzalez v. Astrue, 08 Civ. 3595, 2012 WL 555305 at *12 (S.D.N.Y. Feb. 21, 2012) (ALJ “satisfied his affirmative obligation to develop the administrative record” when he “kept the record open after the administrative hearing to give plaintiffs ... representative an opportunity to submit additional medical evidence of disability prior to plaintiffs last insured date.”).25
III. THE COURT NEED NOT REMAND THIS ACTION TO THE COMMISSIONER BECAUSE FLANIGAN’S NEWLY SUPPORTS THE COMMISSIONER’S DECISION AND IS NOT MATERIAL TO FLANIGAN’S CONDITION DURING THE RELEVANT TIME PERIOD
A limited number of the medical records submitted with Flanigan’s opposition brief are not part of the Administrative Record. (See generally Dkt. Nos. 19-19-5: Flanigan Opp. Br. & Atts.; see also pages 293-95 above.) Evidence not contained in the administrative record may not be considered when reviewing the findings of the Commissioner. See, e.g., 42 U.S.C. § 405(g) (“The court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner of Social Security....”); Carnevale v. Gardner, 393 F.2d 889, 891 n. 1 (2d Cir.1968) (district court correctly refused to consider materials not properly in administrative record); Nieves v. Colvin, 13 Civ. 0107, 2014 WL 1377582 at *17 (S.D.N.Y. Apr. 3, 2014) (Peck, M.J.); Castro v. Acting Comm’r of Soc. Sec., 97 Civ. 5364, 1998 WL 846749 at *10 n. 11 (S.D.N.Y. Dec. 2, 1998) (new evidence not considered because “this court is limited in its review to the record before the Commissioner”); Grubb v. Chater, 992 F.Supp. 634, 637 n. 3 (S.D.N.Y.1998) (new evidence not considered because “[a] court’s review of the Commissioner’s decision is to be based upon the administrative record”); Madrigal v. Callahan, 96 Civ. 7558, 1997 WL 441903 at *7 (S.D.N.Y. Aug. 6, 1997) (“[I]n reviewing decisions of the Commissioner, this Court cannot consider new evidence not made part of the administrative record.”).
Although the Court cannot consider new evidence, this Court may remand to the Commissioner to consider new evidence, “but only upon a showing that there is new evidence which is material and that there is good cause for the failure to incorporate such evidence into the record in a prior proceeding.” 42 U.S.C. § 405(g). The Second Circuit has summarized the three-part showing required by this provision as follows:
*308[A]n appellant must show that the proffered evidence is (1) new and not merely cumulative of what is already in the record, and that it is (2) material, that is, both relevant to the claimant’s condition during the time period for which benefits were denied and probative. The concept of materiality requires, in addition, a reasonable possibility that the new evidence would have influenced the Secretary to decide claimant’s application differently. Finally; claimant must show (3) good cause for her failure to present the evidence earlier.
Jones v. Sullivan, 949 F.2d 57, 60 (2d Cir.1991) (citations & quotations omitted, emphasis added) (quoting Tirado v. Bowen, 842 F.2d 595, 597 (2d Cir.1988)).26
To the extent Flanigan’s newly proffered evidence is not cumulative of what already is in the record (see page 293 n. 3 above), it is immaterial to establishing disability during the relevant time period. As discussed above, without more, records that merely show the existence of a condition prior to the expiration of Flanigan’s insured status — i.e., the 2002 MRIs and the COPD treatment notes from 1996 and 2004 (see pages 294-95 above) — even if considered, would not substantiate that Flanigan’s condition was sufficiently severe to constitute a disability prior to December 31, 2008. (See cases cited on page 304 above.) Moreover, evidence of Flanigan’s 2003 workers’ compensation claim (see page 295 above) is not relevant because of the different legal standards. See, e.g., Simmons v. Colvin, 13 Civ. 1724, 2014 WL 104811 at *7 n. 5 (S.D.N.Y. Jan. 8, 2014) (remand for consideration of workers’ compensation evidence not required since the “ ‘standards which regulate workers’ compensation relief are different from the requirements which govern the award of disability insurance benefits’ ”); DiPalma v. Colvin, 951 F.Supp.2d 555, 574 (S.D.N.Y.2013) (Peck, M.J.).27
*309Accordingly, Flanigan’s newly proffered evidence supports the ALJ’s decision and does not require a remand.
CONCLUSION
For the reasons set forth above, the Commissioner’s determination that Flani-gan was not disabled within the meaning of the Social Security Act during the period from November 1, 2008 (or December 8, 2008) through Flanigan’s date last insured of December 31, 2008 is supported by substantial evidence. It is unfortunate that Flanigan’s eligibility for benefits ended on December 31, 2008 and his apparently disabling conditions arose sometime thereafter. While the Court is sympathetic to Flanigan, the Court must follow the law. The Commissioner’s motion for judgment on the pleadings (Dkt. No. 16) is GRANTED.28 The Clerk of Court shall enter judgment accordingly.
SO ORDERED.
. Flanigan’s opposition is a large, unnumbered submission containing arguments interspersed with supporting documents. (See generally Dkt. No. 19: Flanigan Opp. Br. & Atts.) As an initial matter, the Court notes that significant portions of Flanigan's arguments are repeated verbatim in multiple sections of the submission. (Compare Dkt. No. 19-1: Flanigan Opp. Br. at 1-7, with Dkt. No. 19-3: Flanigan Opp. Br. at 35-40, and Dkt. No. 19-4: Flanigan Opp. Br. at 1-4.) Thus, while three pages of Flanigan’s brief inadvertently were omitted when it was docketed by the Court’s pro se office, the Court has carefully reviewed the documents and confirmed that all of the arguments contained in the omitted pages are included elsewhere in the docketed versions of Flanigan’s brief. In addition, for ease of reference, the Commissioner compiled most of the pages of Flanigan’s brief from his submission and assigned consecutive page numbers. (Dkt. No. 29: Reddy Aff. ¶ 2 & Ex. 1.) Unless otherwise indicated, citations to Flanigan’s opposition brief are to the paginated version submitted with the Commissioner’s reply. (Dkt. No. 29-1: Flanigan Opp. Br.) Citations to those pages of Flanigan’s brief that were not included in the Commissioner’s version, however, are to the ECF document numbers and ECF header page numbers of the full submission as originally docketed by the pro se office. (Dkt. No. 19-3: Flanigan Opp. Br. at 17-19; Dkt. No. 19-5: Flanigan Opp. Br. at 4.) Likewise, citations to attachments also are to the ECF numbers. (Dkt. Nos. 19-19-5: Flanigan Opp. Atts.)
. The only substantive difference between Dr. Kovoor’s letters is an additional sentence in the February 15, 2012 letter (prepared at Flanigan's counsel’s request after the hearing), which states: "Between 9/1/2008 and 3/1/2009 he continued to have cervical symptoms with pain to his left hand. There is no clinical improvement at this time.” (R. 244; see R. 153.)
. Although Flanigan's opposition submission included hundreds of pages of medical records and other supporting documentation (see page 288 above), only the attachments containing new evidence are described herein, since most of the submitted documents already were in the record (Dkt. No. 13), including: (1) Montefiore Medical Center records (compare R. 155-77, 192-99, 256-63, with Dkt. No. 19: Flanigan Opp. Atts. at 12-20, Dkt. No. 19-1: Flanigan Opp. Atts. at 18-20, 23-27, 32-36, Dkt. No. 19-2: Flanigan Opp. Atts. at 1-8, 24-26, Dkt. No. 19-3: Flan-igan Opp. Atts. at 3-16 & Dkt. No. 19-4: Flanigan Opp. Atts. at 5-9); (2) 2010 diagnostic reports (compare R. 210-13, 217-18, 227-31, with Dkt. No. 19-1: Flanigan Opp. Atts. at 8-11, Dkt. No. 19-2: Flanigan Opp. Atts. at 10-13 & Dkt. No. 19 — 4: Flanigan Opp. Atts. at 14); and (3) Dr. Kovoor's treatment notes and letters (compare R. 242, 244, 246-55, with Dkt. No. 19-1: Flanigan Opp. Atts. at 12-16, 28-31, Dkt. No. 19-2: Flanigan Opp. Atts. at 14-23, 27-30 & Dkt. No. 19-3: Flani-gan Opp. Atts. at 1-2, 22).
. Regarding this contention, the Court notes that Flanigan’s ongoing treatment with Dr. Karnani in 2010 is reflected in the record, and a narrative report summarizing that evidence would be cumulative. (R. 213, 217-26, 229; see page 291 above.)
. See also, e.g., Salmini v. Comm’r of Soc. Sec., 371 Fed.Appx. 109, 111 (2d Cir.2010); Betances v. Comm’r of Soc. Sec., 206 Fed.Appx. 25, 26 (2d Cir.2006); Surgeon v. Comm’r of Soc. Sec., 190 Fed.Appx. 37, 39 (2d Cir.2006); Rodriguez v. Barnhart, 163 Fed.Appx. 15, 16 (2d Cir.2005); Malone v. Barnhart, 132 Fed.Appx. 940, 941 (2d Cir.2005); Butts v. Barnhart, 388 F.3d 377, 383 (2d Cir.2004), amended on other grounds, 416 F.3d 101 (2d Cir.2005); Green-Younger v. Barn-hart, 335 F.3d 99, 106 (2d Cir.2003); Veino v. Barnhart, 312 F.3d 578, 586 (2d Cir.2002); Draegert v. Barnhart, 311 F.3d 468, 472 (2d Cir.2002); Shaw v. Chater, 221 F.3d 126, 131 (2d Cir.2000); Brown v. Apfel, 174 F.3d 59, 62 (2d Cir.1999); Rosa v. Callahan, 168 F.3d 72, 77 (2d Cir.1999); Tejada v. Apfel, 167 F.3d 770, 773 (2d Cir.1999); Balsamo v. Chater, 142 F.3d 75, 79 (2d Cir.1998); Perez v. Chater, 77 F.3d 41, 46 (2d Cir.1996).
. See also, e.g., Shaw v. Chater, 221 F.3d at 131-32; Rosa v. Callahan, 168 F.3d at 77; Balsamo v. Chater, 142 F.3d at 79.
. See, e.g., Brunson v. Callahan, No. 98-6229, 199 F.3d 1321 (table), 1999 WL 1012761 at *1 (2d Cir. Oct. 14, 1999); Brown v. Apfel, 174 F.3d at 62; Carroll v. Secy of Health & Human Servs., 705 F.2d 638, 642 (2d Cir.1983).
. See also, e.g., Prince v. Astrue, 514 Fed.Appx. 18, 19 (2d Cir.2013); Salmini v. Comm’r of Soc. Sec., 371 Fed.Appx. 109, 111 (2d Cir.2010); Acierno v. Barnhart, 475 F.3d 77, 80-81 (2d Cir.), cert. denied, 551 U.S. 1132, 127 S.Ct. 2981, 168 L.Ed.2d 704 (2007); Halloran v. Barnhart, 362 F.3d 28, 31 (2d Cir.2004); Jasinski v. Barnhart, 341 F.3d 182, 184 (2d Cir.2003); Veino v. Barnhart, 312 F.3d 578, 586 (2d Cir.2002); Shaw v. Chater, 221 F.3d 126, 131 (2d Cir.2000); Brown v. Apfel, 174 F.3d 59, 61 (2d Cir.1999); Rosa v. Callahan, 168 F.3d 72, 77 (2d Cir.1999); Tejada v. Apfel, 167 F.3d 770, 773 (2d Cir.1999); Schaal v. Apfel, 134 F.3d 496, 501 (2d Cir.1998); Perez v. Chater, 77 F.3d 41, 46 (2d Cir.1996); Rivera v. Sullivan, 923 F.2d 964, 967 (2d Cir.1991); Mongeur v. Heckler, 722 F.2d 1033, 1038 (2d Cir.1983) (per curiam); Dumas v. Schweiker, 712 F.2d 1545, 1550 (2d Cir.1983).
.See also, e.g., Karle v. Astrue, 12 Civ. 3933, 2013 WL 2158474 at *9 (S.D.N.Y. May 17, 2013) (Peck, M.J.), report & rec. adopted, 2013 WL 4779037 (S.D.N.Y. Sept. 6, 2013); Santiago v. Astrue, 11 Civ. 6873, 2012 WL 1899797 *13 (S.D.N.Y. May 24, 2012) (Peck, M.J.); Duran v. Barnhart, 01 Civ. 8307, 2003 WL 103003 at *9 (S.D.N.Y. Jan. 13, 2003); Florencio v. Apfel, 98 Civ. 7248, 1999 WL 1129067 at *5 (S.D.N.Y. Dec. 9, 1999) (Chin, D.J.) ("The Commissioner’s decision is to be afforded considerable deference; the reviewing court should not substitute its own judgment for that of the Commissioner, even if it might justifiably have reached a different result upon a de novo review.” (quotations & alterations omitted)).
. See also, e.g., Halloran v. Barnhart, 362 F.3d at 31; Jasinski v. Barnhart, 341 F.3d at 184; Green-Younger v. Barnhart, 335 F.3d at 106; Veino v. Barnhart, 312 F.3d at 586; Shaw v. Chater,, 221 F.3d at 131; Curry v. Apfel, 209 F.3d 117, 122 (2d Cir.2000); Brown v. Apfel, 174 F.3d at 61; Perez v. Chater, 77 F.3d at 46.
. See also, e.g., Campbell v. Astrue, 465 Fed.Appx. 4, 6 (2d Cir.2012); Veino v. Barnhart, 312 F.3d at 586.
. See also, e.g., Jasinski v. Barnhart, 341 F.3d at 183-84; Green-Younger v. Barnhart, 335 F.3d at 106; Shaw v. Chater, 221 F.3d at 132; Brown v. Apfel, 174 F.3d at 62; Balsamo v. Chater, 142 F.3d 75, 79-80 (2d Cir.1998); Schaal v. Apfel, 134 F.3d at 501; Perez v. Chater, 77 F.3d at 46; Dixon v. Shalala, 54 F.3d 1019, 1022 (2d Cir.1995); Berry v. Schweiker, 675 F.2d 464, 467 (2d Cir.1982).
. See also, e.g., Selian v. Astrue, 708 F.3d at 418; Betances v. Comm’r of Soc. Sec., 206 Fed.Appx. 25, 26 (2d Cir.2006); Green-Younger v. Barnhart, 335 F.3d at 106; Rosa v. Callahan, 168 F.3d at 80; Perez v. Chater, 77 F.3d at 46; Berry v. Schweiker, 675 F.2d at 467.
.See also, e.g., Foxman v. Barnhart, 157 Fed.Appx. 344, 346 (2d Cir.2005); Tavarez v. Barnhart, 124 Fed.Appx. 48, 49 (2d Cir.2005); Donnelly v. Barnhart, 105 Fed.Appx. 306, 308 (2d Cir.2004); Halloran v. Barnhart, 362 F.3d 28, 32 (2d Cir.2004); Green-Younger v. Barnhart, 335 F.3d 99, 106 (2d Cir.2003); Kamerling v. Massanari, 295 F.3d 206, 209 n. 5 (2d Cir.2002); Jordan v. Barnhart, 29 Fed.Appx. 790, 792 (2d Cir.2002); Bond v. Soc. Sec. Admin., 20 Fed.Appx. 20, 21 (2d Cir.2001); Shaw v. Chater, 221 F.3d 126, 134 (2d Cir.2000); Rosa v. Callahan, 168 F.3d 72, 78-79 (2d Cir.1999); Clark v. Comm’r of Soc. Sec., 143 F.3d 115, 118 (2d Cir.1998); Schaal v. Apfel, 134 F.3d 496, 503 (2d Cir.1998).
. See also, e.g., Kugielska v. Astrue, 06 Civ. 10169, 2007 WL 3052204 at *8 (S.D.N.Y. Oct. 16, 2007); Hill v. Barnhart, 410 F.Supp.2d 195, 217 (S.D.N.Y.2006); Klett v. Barnhart, 303 F.Supp.2d 477, 484 (S.D.N.Y.2004); Rebull v. Massanari, 240 F.Supp.2d 265, 268 (S.D.N.Y.2002).
. See also, e.g., 42 U.S.C. § 423(d)(5)(B); 20 C.F.R. §§ 404.1512(d), 416.912(d), *300416.912(e)(2); Padula v. Astrue, 514 Fed.Appx. 49, 51 (2d Cir.2013); Winn v. Colvin, 541 Fed.Appx. 67, 70 (2d Cir.2013); Burgess v. Astrue, 537 F.3d 117, 128 (2d Cir.2008); Perez v. Chater, 77 F.3d 41, 47 (2d Cir.1996); Echevarria v. Sec'y of Health & Human Servs., 685 F.2d 751, 755 (2d Cir.1982); Torres v. Barnhart, 02 Civ. 9209, 2007 WL 1810238 at *9 (S.D.N.Y. June 25, 2007) (Peck, MJ.) ( & cases cited therein).
. Accord, e.g., Whiting v. Astrue, No. Civ. A. 12-274, 2013 WL 427171 at *2 (N.D.N.Y. Jan. 15, 2013) (" 'The mere presence of a disease or impairment alone ... is insufficient to establish disability; instead, it is the impact of the disease, and in particular any limitations it may impose upon the claimant’s ability to perform basic work functions, that is pivotal to the disability inquiry.’ ”), report & rec. adopted, 2013 WL 427166 (N.D.N.Y. Feb. 4, 2013); Lohnas v. Astrue, No. 09-CV-685, *3012011 WL 1260109 at *3 (W.D.N.Y. Mar. 31, 2011), aff'd, 510 Fed.Appx. 13 (2d Cir.2013); Hahn v. Astrue, 08 Civ. 4261, 2009 WL 1490775 at *7 (S.D.N.Y. May 27, 2009) (Lynch, D.J.) ("[I]t is not sufficient that a plaintiff ’establish[] the mere presence of a disease or impairment.’ Rather, 'the disease or impairment must result in severe functional limitations that prevent the claimant from engaging in any substantial gainful activity.’ ” (citation omitted)); Rodriguez v. Califano, 431 F.Supp. 421, 423 (S.D.N.Y.1977) ("The mere presence of a disease or impairment is not disabling within the meaning of the Social Security Act.”).
. Social Security Ruling 96-4p provides, in relevant part:
1. A "symptom” is not a "medically determinable physical or mental impairment” and no symptom by itself can establish the existence of such an impairment.
In the absence of a showing that there is a "medically determinable physical or mental impairment,” an individual must be found not disabled at step 2 of the sequential evaluation process. No symptom or combination of symptoms can be the basis for a finding of disability, no matter how genuine the individual’s complaints may appear to be, unless there are medical signs and laboratory findings demonstrating the existence of a medically determinable physical or mental impairment.
SSR 96-4p, 1996 WL 374187 (July 2, 1996) (emphasis added). Medical signs are defined as "anatomical, physiological, or psychological abnormalities which can be observed, apart from [the claimant’s] statements (symptoms),” and which “must be shown by medically acceptable clinical diagnostic techniques.” 20 C.F.R. § 404.1528(b). Laboratory findings are defined as “anatomical, physiological, or psychological phenomena which can be shown by the use of medically acceptable laboratory diagnostic techniques,” such as "chemical tests, electrophysiological studies (electrocardiogram, electroencephalogram, etc.), roentgenological studies (X-rays), and psychological tests.” 20 C.F.R. § 404.1528(c).
. Contrary to Flanigan's argument (see page 293 above), although ALJ Gonzalez noted that Dr. Kovoor’s November 7, 2008 record indicated Flanigan "want[ed] clearance for work,” which was inconsistent with “claiming the onset of disability beginning November 1, 2008, only one week prior” (R. 16, 242, 250), amending the onset date to December 8, 2008 to cure that inconsistency would not change the fact that there simply is no evidence to substantiate the existence of a sufficiently severe medically determinable impairment prior to the expiration of Flanigan's insured status.
. Flanigan asserts that the only reason he did not undergo diagnostic testing when he stopped working in December 2008 was because he was uninsured and thus could not afford "tests of any nature.” (Dkt. No. 29-1: Flanigan Opp. Br. at 5; see page 294 above.) However, Flanigan also states that he obtained medical insurance (Medicaid) approximately three months later, i.e., in or about March 2009. (Flanigan Opp. Br. at 5: "I obtained medical treatment as soon as possible, as I had no health insurance at the time, and had to wait approximately three months to obtain Medicaid.... I did get medical treatment as soon as I obtained medical insurance, which was about three months later.”) Thus, Flanigan's inability to pay for diagnostic testing between December 2008 and March 2009 does not explain why, if Dr. Kovoor had in fact deemed such tests to be necessary in December 2008, Flanigan would have waited until March 2010, a year after obtaining insurance, to get them.
.See R. 27-28 (stating he stopped working "around November of 2008” and that "at that point [he] wasn’t in the condition that [he is] now”); R. 28 ("Around December of 2009 it started to get worse actually and I noticed an occasional numbness in my left hand. The pain in my neck was becoming more and more severe and I really didn't do anything about it at that point until February when I wo[ke] up one morning and literally my left hand was completely numb. My fingers, I couldn't move it and at that point in time I went back to my doctor and he referred me to a neurologist. He said, look you have a problem here. You need to go through a certain amount of tests. Your condition has deteriorated and we need to find out actually how fast and how far.”); R. 29 ("But until that point in time [in December 2009] it wasn't at that state. It was bad enough for me not to be able to [do] the manual work but it wasn’t to the point where I thought I couldn't work anymore. And it just it really deteriorated very quickly.”); R. 33 ("Oh the — well it deteriorated fast. It started around December of 2009. I noticed it starting to get worse. And it got to the point literally where it was debilitating by February [of 2010].”); R. 33-34 *303(stating that the symptoms he experienced in 2010 were "present in November of 2008” but "[n]ot to that degree,” i.e., “not to the point where they went” in 2010).
. See also, e.g., Papp v. Comm’r of Soc. Sec., 2006 WL 1000397 at *17 ("For the period before June 30, 2001, [claimant’s] date last insured, the contemporaneous records of ... [claimant's doctor] show that while [claimant] was depressed, she was 'doing well' on her medications. [Doctor’s] treating notes from that key period provide substantial evidence to support the ALJ's conclusion that [claimant] was not disabled. [Doctor's] later reports, in July-August 2002 and in 2003, specifically stated that they applied to [claimant’s] then ‘present’ condition, and thus do not provide evidence as to her condition in the January-June 2001 period.” (citations omitted)); Velez v. Barnhart, 03 Civ. 0778, 2004 WL 1464048 at *4 (S.D.N.Y. May 28, 2004) ("[W]hile the evidence of medical treatment received by [claimant] after [his last date insured] ‘is not irrelevant’ to a determination of disability prior to that date, there is no evidence that [claimant’s] condition was as severe prior to [his date last insured] as it was at the time of such treatment. Even if some or all of [claimant's] conditions did accrue on or before [his date last insured], however, the evidence is insufficient to show that those conditions rose to the level of a 'disability,' as defined by the Act.” (citations omitted)); Acosta v. Barnhart, 2003 WL 1877228 at *12 ("While [claimant’s doctor] diagnosed [claimant] as having 'low back pain’ and ‘anxiety disorder’ [in May 1996], he did not opine as to whether [claimant] was disabled as of that date, nor did he provide any opinion or medical evidence that [claimant] was disabled as of December 1995, his last insured date. Thus, [claimant] failed to show the existence of a disability since he presented no medical evidence as to his condition during the pre-May 1996 period.” (citation omitted)); Keller v. Barnhart, 01 Civ. 4334, 2002 WL 31778867 at *3 (S.D.N.Y. Dec. 12, 2002) (Claimant "has not sustained his burden of showing that he was disabled prior to December 31, 1989, the date he was last insured for disability insurance benefits. Although the medical evidence of record shows that [claimant] may currently have severe impairments, this evidence postdates [claimant’s] last insured date by approximately ten years. There is no evidence regarding treatment from January 1, 1987 to December 31, 1989.... The record contains two letters from [a doctor] which suggest that [claimant] may have had back trouble during the relevant period. However, this evidence is insufficient to establish disability.... The ALJ properly decided that [claimant] failed to establish the existence of a severe impairment during the relevant period.”).
. See also, e.g., Saviano v. Chater, No. 97-6124, 152 F.3d 920 (table), 1998 WL 314386 at *3 (2d Cir. May 8, 1998); Nelson v. Colvin, No. 12-CV-1810, 2014 WL 1342964 at *10 (E.D.N.Y. Mar. 31, 2014) ('“[T]he Second Circuit has stated that it is entirely appropriate to give a treating physician’s opinion less weight when it is internally inconsistent.’ ”); Halmers v. Colvin, No. 12-CV-00288, 2013 WL 5423688 at *4-5 (D.Conn. Sept. 26, 2013); Sisto v. Colvin, No. 12-CV-2258, 2013 WL 4735694 at *9 (E.D.N.Y. Sept. 3, 2013); Papp v. Comm'r of Soc. Sec., 2006 WL 1000397 at *17 (no controlling weight where "there were inconsistencies between [doctor’s] contemporaneous treatment notes and his later opinion").
. See also, e.g., Perez v. Chater, 77 F.3d 41, 47-48 (2d Cir.1996); Petell v. Comm’r of Soc. Sec., No. 12-CV-1596, 2014 WL 1123477 at *10 (N.D.N.Y. Mar. 21, 2014); Cordero v. As-*307true, 11 Civ. 5020, 2013 WL 3879727 at *3 (S.D.N.Y. July 29, 2013); Hall v. Astrue, 677 F.Supp.2d 617, 628 (W.D.N.Y.2009).
. See also, e.g., Weingarten v. Apfel, 98 Civ. 2475, 1999 WL 144486 at *4 (S.D.N.Y. Mar. 17, 1999) (ALJ "made every reasonable effort to fully develop the record” where he "consented to plaintiff’s attorney’s request to keep the record open one week after the hearing to enable the attorney to submit any additional information”); Robinson v. Chater, 94 Civ. 0057, 1996 WL 5067 at *7 (S.D.N.Y. Jan. 5, 1996) (“[T]he ALJ twice informed [claimant’s] representative that the record would be kept open in order for new medical records to be submitted. When claimant’s representative indicated that he would attempt to locate the document within three weeks after the hearing, and that he would contact the ALJ if he were not able to do so, the ALJ was under no further obligation.” (citation omitted)).
. Accord, e.g., Lisa v. Sec’y of Dep’t of Health & Human Servs., 940 F.2d 40, 43 (2d Cir.1991); DeJesus v. Apfel, 97 Civ. 4779, 2000 WL 1586419 at *3 (S.D.N.Y. Oct. 24, 2000); Duvergel v. Apfel, 99 Civ. 4614, 2000 WL 328593 at *2 & n. 6 (S.D.N.Y. Mar. 29, 2000) (Peck, M.J.); Pantojas v. Apfel, 87 F.Supp.2d 334, 339 (S.D.N.Y.2000); Casiano v. Apfel, 39 F.Supp.2d 326, 331 (S.D.N.Y.1999), aff'd, 205 F.3d 1322 (2d Cir.2000); Hursey v. Apfel, No. 97 Civ. 4757, 1998 WL 812585 at *4 (E.D.N.Y. Apr. 27, 1998); Tracy v. Apfel, No. 97-CV-4357, 1998 WL 765137 at *4 (E.D.N.Y. Apr. 22, 1998); Madrigal v. Callahan, 1997 WL 441903 at *7-8; Counterman v. Chater, 923 F.Supp. 408, 414 (W.D.N.Y.1996).
. See abo, e.g., Gillespie v. Astrue, No. 09-CV-2198, 2012 WL 3646820 at *13 (E.D.N.Y. Aug. 23, 2012) (“Plaintiffs treating physicians opined that he was disabled with regard to workers' compensation. However, those determinations are not dispositive, because the standards for workers’ compensation are different than those under the Act.”); Rokitka v. Astrue, No. 11-CV-614, 2012 WL 2405197 at *3 (W.D.N.Y. June 25, 2012) ("‘[D]isability for purposes of workers’ compensation benefits is determined under a different standard than the standard used in the Social Security context[.]' ”); Lefever v. Astrue, No. 07-CV-622, 2010 WL 3909487 at *13 (N.D.N.Y. Sept. 30, 2010) (“Workers' compensation determinations are directed to the workers’ prior employment and measure the ability to perform that employment rather than using the definition of disability in the Social Security Act. Because disability for purposes of workers’ compensation benefits is determined under a different standard than the standard used in the Social Security context, the ALJ is not bound to afford [the treating physician’s] finding controlling weight.” (citation omitted)), aff'd, 443 Fed.Appx. 608 (2d Cir.2011); Fortier v. Astrue, 09 Civ. 993, 2010 WL 1506549 at *24 (S.D.N.Y. Apr. 13, 2010) ("[F]indings of disability for workers’ compensation purposes are of limited utility for disability purposes under the Social Security Act. Those findings are geared to the person’s prior employment and allow findings of partial disability.” (quotations omitted)); DeJesus v. Chater, 899 F.Supp. 1171, 1177 (S.D.N.Y.1995).
. If Flanigan requires copies of any of the cases reported only in Westlaw, he should request copies from opposing counsel. See Lebron v. Sanders, 557 F.3d 76, 79 (2d Cir.2009); SDNY-EDNY Local Civil Rule 7.2. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224463/ | MEMORANDUM AND ORDER
RICHARD J. SULLIVAN, District Judge:
On March 31, 2013, Defendant Michael Steinberg was indicted on one count of conspiracy to commit securities fraud and four counts of securities fraud, all relating to insider trading in Dell, Inc. (“Dell”) and NVIDIA Corp. (“NVIDIA”) stock from 2007 through 2009. (Doc. No. 230.) On December 18, 2013, after a four-week trial, a jury convicted Defendant on all five counts. Now before the Court, is Defendant’s motion for acquittal under Rule 29 of the Federal Rules of Criminal Procedure. For the reasons set forth below, the motion is denied.
I. Background
*312A. Facts1
Defendant, who was a portfolio manager at the hedge fund SAC Capital Advisors (“SAC”) (Trial Tr. at 69:10-19), obtained inside information from Dell and NVIDIA through long and convoluted chains of tippers.
For the Dell information, Rob Ray (“Ray”), a Dell employee assigned to the company’s investor relations department, tipped confidential Dell information to a friend, Sandeep Goyal (“Goyal”). (Trial Tr. at 3003:3-6, 3014:8-15, 3019:1-3020:1, 3030:11-3034:16.) In exchange, Goyal provided career advice and references to Ray, who hoped to move into the financial industry. (Id. at 3015:10-3029:2, 3036:10-19.) Goyal then tipped the information to Jesse Tortora (“Tortora”), a securities analyst, in exchange for money. (Id. at 3003:3-6, 3035:9-3036:9, 3037:10-14.) Tor-tora in turn shared the information with a group of analyst friends as part of a general exchange of securities tips among the friends. (Id. at 171:5-172:6, 185:20-186:19.) One of those friends was Jon Horvath (“Horvath”) (id. at 171:18-20), who worked for Defendant at SAC (id. at 882:6-18). Horvath gave the information to Defendant (id. at 929:15-930:5), who subsequently earned $1,469,593 for his portfolio by trading in Dell securities (Government Trial Exhibit (“GX”) 51; GX 59; GX 2505; GX2505-C).
The NVIDIA information followed a similar route. Chris Choi (“Choi”), an employee of NVIDIA, tipped confidential NVIDIA information to his family friend Hyung Lim (“Lim”) in order to help Lim trade in NVIDIA securities. (Trial Tr. at 3204:22-3205:5, 3217:11-19, 3218:1-3219:1, 3219:18-3220:3.) Lim in turn provided the information to his friend Danny Kuo (“Kuo”) (id. at 3217:11-21), partly because they were friends and partly in exchange for payments and stock tips (id. at 3213:11-14, 3215:23-25, 3227:9-3230:7). Kuo was a member of Tortora’s circle of analyst friends (id. at 171:18-172:6), and through the circle he shared the information with Horvath (id. at 1244:12-13, 1251:17-1253:2). Again, Horvath shared the information with Defendant (id. at 1301:13-22), who subsequently earned $349,756 for his portfolio by trading in NVIDIA securities (id. at 3299:25-3300:13; GX 81).
B. Procedural Background
Defendant made his Rule 29 motion at the close of the government’s case. (Trial Tr. at 3385:24-3387:9.) After hearing arguments from the parties, the Court reserved judgment on the motion. (Id. at 3402:4-3411:11.) At Defendant’s request, the Court extended the deadline for post-trial briefing until February 3, 2014 (Doc. No. 333), but Defendant ultimately decided not to file any additional submissions.
II. Legal StandaRD
A. Rule 29
Rule 29(a) requires the court to “enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction.” Fed.R.Crim.P. 29(a). Where the court reserves judgment until after the jury returns a verdict, it must still “decide the motion on the basis of the evidence at the time the ruling was reserved.” Fed.R.Crim.P. 29(b). “A defendant challenging a conviction based on *313insufficient evidence bears a heavy burden.” United States v. Aina-Marshall, 336 F.3d 167, 171 (2d Cir.2003). “[T]he 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.” Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). In this analysis, the court does not assess- witness credibility, resolve inconsistent testimony against the verdict, or otherwise weigh the significance of the evidence. See United States v. Autuori, 212 F.3d 105, 114 (2d Cir.2000). Further, the court is to apply this test to “the totality of the government’s case and not to each element, as each fact may gain color from others.” United States v. Guadagna, 183 F.3d 122, 130 (2d Cir.1999). “[T]he court may enter a judgment of acquittal only if the evidence that the defendant committed the crime alleged is ‘nonexistent or so meager that no reasonable jury could find guilt beyond a reasonable doubt.’ ” Id. (quoting United States v. White, 673 F.2d 299, 301 (10th Cir.1982)).
B. The Elements of Tippee Liability
“To hold [a tippee defendant] criminally liable for insider trading, the government ... [must] prove each of the following elements beyond a reasonable doubt: (1) the insider-tippers ... were entrusted the duty to protect confidential information,- which (2) they breached by disclosing [the information] to their tippee ..., who (3) knew of [the tippers’] duty and (4) still used the information to trade a security or further tip the information for [the tippee’s] benefit, and finally (5) the insider-tippers benefited in some way from their disclosure.” United States v. Jiau, 734 F.3d 147, 152-53 (2d Cir.2013). In cases involving tipping chains, where information is passed along from person to person, “[t]he final tippee must both know or have reason to know that the information was obtained through a breach and trade while in knowing possession of the information.” SEC v. Obus, 693 F.3d 276, 288 (2d Cir.2012).2
III. DISCUSSION
Defendant made five specific arguments for acquittal, asserting that no rational jury could find that (A) “the [Dell] tipper [Ray] ... understood [that the tipped information] would be used for trading in a security” (Trial Tr. at 3404:2-24); (B) Defendant “had knowledge that [Horvath] *314was getting ... material nonpublic information obtained in” breach of a fiduciary duty (id at 3403:6-3404:1); (C) Defendant “had any knowledge whatsoever of any benefit paid to any of the tippers alleged to be part of the conspiracy” (id at 3402:9-3403:5); (D) the Dell trade underlying Count Two of the Indictment “w[as] made based on illegal inside information” (id at 3407:11-17); and (E) the NVIDIA trade underlying Count Four of the Indictment was made based on illegal inside information (id at 3407:18-3408:6). The Court addresses each argument in turn.
A. Tipper’s Knowledge of Trading
Under the elements for tippee liability listed above, there is no requirement that the jury find that the tipper know or believe that the tipped information will be used to trade securities. As the Second Circuit explained in United States v. Libera,
The tipper’s knowledge that he or she was breaching a duty to the owner of confidential information suffices to establish the tipper’s expectation that the breach will lead to some kind of a misuse of the information. This is so because it may be presumed that the tippee’s interest in the [material, nonpublic] information is, in contemporary jargon, not for nothing. To allow a tippee to escape liability solely because the government cannot prove to a jury’s satisfaction that the tipper knew exactly what misuse would result from the tipper’s wrongdoing would ... serve no purpose other than to create a loophole for such misuse.
989 F.2d 596, 600 (2d Cir.1993). The Court therefore rejects Defendant’s first argument as a matter of law.
B. Knowledge of Breach
In order to convict an insider-trading tippee, a jury must find that the tippee knew that the tipper disclosed material, nonpublic information in breach of a duty. See Dirks v. SEC, 463 U.S. 646, 661, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983); Jiau, 734 F.3d at 152-53. To determine if sufficient evidence existed to establish that Defendant knew of the tippers’ breaches of duty, the Court must first address what a “breach' of duty” entails. As discussed below, under Second Circuit precedent, “breach of duty” could refer either to (1) the combination of an unauthorized disclosure of confidential information and a benefit to the tipper, or (2) just an unauthorized disclosure, even without personal benefit. Even under the more demanding first definition, the Court finds that there was sufficient evidence to show Defendant’s knowledge.
1. The Meaning of “Breach”
In Dirks, the Supreme Court implied that a breach of duty required both an unauthorized disclosure and a benefit to the tipper. See Dirks, 463 U.S. at 662, 103 S.Ct. 3255 (“Absent some personal gain, there has been no breach of duty....”); see also United States v. Chestman, 947 F.2d 551, 575-76 (2d Cir.1991) (en banc) (“Whether the tip breaches such a fiduciary obligation depends upon whether the tipper receives a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings.” (internal quotation marks omitted)). Several more recent Second Circuit cases, however, have implied that the tipper’s “breach of duty” refers solely to the tipper’s unauthorized disclosure and does not include the tipper’s benefit. In these cases, breach of duty and benefit are treated as distinct elements, each of which must be separately proven for tipper and tippee liability, but only the first of which must be known by the tippee. See SEC v. Con-*315torinis, 743 F.3d 296, 311 (2d Cir.2014) (“In the tipper-tippee situation, the tipper and tippee are concerted actors, jointly-engaging in fraudulent activity — the tipper breaches a fiduciary duty by disclosing inside information; the tippee trades on that information, knowing of the breach and without disclosing what he knows; and the tipper obtains ‘a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings.’ ” (quoting Dirks, 463 U.S. at 663, 103 S.Ct. 3255)); Jiau, 734 F.3d at 152-53 (listing elements including “(2) [the insider-tippers] breached by disclosing [the information] to their tippee” and “(5) the insider-tippers benefited in some way from their disclosure”); Obus, 693 F.3d at 289 (“[Tapper liability requires that (1) the tipper had a duty to keep4 material nonpublic information confidential; (2) the tipper breached that duty by intentionally or recklessly relaying the information to a tippee who could use the information in connection with securities trading; and (3) the tipper received a personal benefit from the tip. Tippee liability requires that (1) the tipper breached a duty by tipping confidential information; (2) the tippee knew or had reason to know that the tippee improperly obtained the information (i.e., that the information was obtained through the tipper’s breach); and (3) the tippee, while in knowing possession of the material non-public information, used the information by trading or by tipping for his own benefit.”). Indeed, there would be no reason for these cases to separately require proof of breach of duty and benefit if benefit were necessarily included within breach of duty.
Although an interesting topic in its own right, there is no need to resolve this apparent conflict here. At the trial, the Court defined breach of duty to the jury using the more demanding “disclosure-for-benefit” definition. (See Trial Tr. at 3701:18-24 (“[THE COURT:] Now, if you find that Mr. Ray and Mr. Choi had a fiduciary or other relationship of trust and confidence with their employers, then you next must consider whether the government has proven beyond a reasonable doubt that they intentionally breached that duty of trust and confidence by disclosing material nonpublic information for their own personal benefit.” (emphasis added)); see also id. at 3700:12-19 (“[T]he government must prove beyond a reasonable doubt that Rob Ray and Chris Choi had a fiduciary or other relationship of trust and confidence with Dell and Nvidia respectively; that as a result of that relationship, they were entrusted with material nonpublic information with the reasonable expectation that they would keep it confidential and would not use it for personal benefit.” (emphasis added)); id. at 3701:25-3702:2, 3703:20-25 (defining “benefit” within the breach-of-duty instruction).) As a result, when the jury found Defendant guilty, it necessarily found that he knew the tippers had breached their duties to the companies by “disclosing material nonpublic information for their own personal benefit.” (Id. at 3701:18-24; see also id. at 3704:16-19 (“[THE COURT:] To meet its burden the government must also prove beyond a reasonable doubt that the defendant knew the material nonpublic information had been disclosed by the insider in breach of a duty of trust and confidence.”).)3 For consistency, the Court will adhere to that same definition of breach of duty — unauthorized *316disclosure for personal benefit — for purposes of this motion.
2. A Rational Jury Could Find That Defendant Knew of the Tippers’ Breaches
Under the Court’s jury charge, the government had to show beyond a reasonable doubt that Defendant either knew of or was willfully blind to the tippers’ breaches of duty.4 (See Trial Tr. at 3708:15-3709:12.) A jury can find that a defendant was willfully blind “ ‘where a defendant’s involvement in the criminal offense may have been so overwhelmingly suspicious that the defendant’s failure to question the suspicious circumstances establishes the defendant’s purposeful contrivance to avoid guilty knowledge.’ ” United States v. Whitman, 555 Fed.Appx. 98, 105, 2014 WL 628143, at *5 (2d Cir.2014) (quoting United States v. Svoboda, 347 F.3d 471, 480 (2d Cir.2003)).
Horvath testified that several times per quarter, every quarter, for seven or eight quarters in a row, he received “nonpublic” “high-level income statement information” about Dell that was “quite accurate, very accurate” and that he knew came from a contact inside Dell. (Trial Tr. 925:16-927:9, 930:4-5.) Horvath stated that he passed on the information to Defendant and that he told Defendant the information came from an insider. (Id. at 929:15-930:5; see also id. at 412:21-24 (“[TORTORA:] [Horvath] and I have had several conversations that I was sharing information that he gave me to Todd [Newman], and he told me he was sharing information that I gave him to Mike Steinberg.”).) Horvath further testified that for five quarters he received “nonpublic” revenues and gross margins information about NVIDIA that was “very, very accurate,” was “very important to investors,” and came from someone inside Nvidia. (Id. at 1300:17-1301:12.) He stated that he also passed this information to Defendant and told him it came from an NVIDIA insider. (Id. at 1301:13-22.) In addition, Horvath testified that he could not get information “close” to the Dell information through normal company channels and that he had never heard of anyone getting that kind of information before it was publicly announced. (Id. at 987:3-10.) Similarly, with respect to NVI-DIA, the government entered into evidence an email from Horvath informing Defendant that NVIDIA had a “firm” policy forbidding disclosure preceding earnings announcements. (GX 957.)
Based on this evidence alone, a rational jury could have found that Defendant either knew or was willfully blind to the fact that the sources inside these companies were making unauthorized disclosures for *317a personal benefit. The evidence at trial amply demonstrated that Defendant was an experienced investment professional who, a jury could infer, understood what kinds of information are available through legitimate channels and what kinds of information are not. (Cf. Trial Tr. at 3033:23-3034:19 (testimony by Goyal that he knew from experience that the type of information he obtained about Dell was not authorized for disclosure); id. at 3223:22-3224:7 (testimony by Lim that he knew from experience that the type of information he obtained about NVIDIA was not authorized for disclosure).) A jury could therefore reasonably find that Defendant either knew or was “overwhelmingly suspicious” that information that could not have been obtained through authorized means was in fact received through unauthorized means. This is especially true given evidence that Defendant was trained to recognize illegal inside information (id. at 819:1-18, 821:1-827:6) and evidence that he was alert to the legal implications of insider trading (see GX 1204 (email from Defendant observing that an email from Hor-vath discussing contacts at a company could “wake up some of [SAC’s] legal eagles”)).
Regarding benefit to the tipper, once a rational jury found that Defendant knew the disclosures were unauthorized, it also could find that Defendant either knew or was overwhelmingly suspicious that the original sources of that valuable information were receiving some benefit in return. A rational jury could come to this conclusion by reasonably inferring that Defendant was savvy enough to understand that there is no such thing as a free lunch. Cf. Libera, 989 F.2d at 600 (“[I]t may be presumed that the tippee’s interest in the information is, in contemporary jargon, not for nothing.”). Here, a rational jury could find that Defendant knew or was willfully blind to the fact that he was (1) repeatedly receiving (2) valuable, material, nonpublic information (3) from a company insider (4) in violation of company policy (5) numerous times each quarter. Given those facts, a rational jury would surely be justified in further concluding that Defendant knew or at least overwhelmingly suspected that personal benefit to the original sources— who were risking their jobs — was somehow involved. Only a Pollyanna could have believed otherwise.
It is of no moment that Defendant might not have known precisely how his tipper-patrons were rewarded. As Judge Rakoff held in United States v. Whitman, Defendant needed to know that duties of trust and confidence were breached; he did not need to “know the details.” See 904 F.Supp.2d 363, 374 (S.D.N.Y.2012), aff'd, 555 Fed.Appx. 98 (2d Cir.2014). Moreover, under Dirks and Second Circuit precedent, virtually anything Defendant might have imagined the tipper received— even something as small as Choi’s benefit from helping his friend Lim — would qualify as personal benefit. See Obus, 693 F.3d at 285 (“[Personal benefit includes] ‘repu-tational benefit’ or the benefit one would obtain from simply ‘mak[ing] a gift of confidential information to a trading relative or friend.’ ” (quoting Dirks, 463 U.S. at 663-64, 103 S.Ct. 3255)).
On the facts presented at trial, a rational jury could find that Defendant knew or was willfully blind to the fact that the tippers breached duties of trust and confidence by disclosing material nonpublic information for their personal benefits. Accordingly, the Court rejects Defendant’s second argument.
C. Knowledge of Benefit as a Separate Element
Defendant next argues that the jury was required to find that Defendant, in addition to knowing of the tippers’ *318breach of duty, knew of the tippers’ benefit. (See Doc. No. 309 at 25-26 (joint proposed jury charge including a request by Defendant to instruct the jury that it was not illegal for Defendant to trade “on tips where he does not know that the information had been disclosed in violation of a duty or confidence, in exchange for a personal benefit to the tipper” (emphasis omitted)); Doc. No. 323 at 3 (letter from Defendant discussing his request to charge the jury that Defendant “must have known not only that the alleged material nonpublic information was disclosed in breach of a duty of trust or confidence but also must have known that it was disclosed in exchange for a personal benefit to the insider” (emphasis added)).) As noted above, to the extent that knowledge of breach of duty encompasses knowledge of benefit, Defendant seeks to add a redundant and unnecessary element. To the extent that knowledge of breach of duty is distinct from knowledge of benefit, under Second Circuit precedent there is no requirement that the government prove that a defendant knew anything other than that the tippers breached a duty.
Under the elements for tippee liability listed in Jiau, for instance, there is a requirement that the tippee knew of the breach, but there is no requirement that the tippee knew of the existence or nature of the benefit. See Jiau, 734 F.3d at 152-53 (“To hold [a tippee defendant] criminally liable for insider trading, the government ... [must] prove each of the following elements beyond a reasonable doubt: (1) the insider-tippers ... were entrusted the duty to protect confidential information, which (2) they breached by disclosing [the information] to their tippee ..., who (3) knew of [the tippers’] duty and (4) still used the information to trade a security or further tip the information for [the tip-pee’s] benefit, and finally (5) the insider-tippers benefited in some way from their disclosure.”). It is hard to believe that the omission of a standalone knowledge-of-benefit element was accidental, as Jiau listed the tippers’ breach of a duty and the tippers’ receipt of a benefit as two separate elements, and therefore considered them both, but only required the tippee to know of the breach. See id. Indeed, the ordering of the elements in Jiau and the sentence’s grammatical structure — with the benefit element isolated at the end— appear designed to segregate the existence of the tippers’ benefit from the tippee’s knowledge. See id.
Moreover, the absence of knowledge-of-the-benefit as a separate element for tip-pee liability in Jiau cannot be ignored as a one-off occurrence. In fact, for more than two decades, the Second Circuit has repeatedly held that the tippee must know of the tipper’s breach but has never required a separate element of the tippee’s knowledge of the tipper’s benefit. See, e.g., Contorinis, 743 F.3d at 311 (“In the tipper-tippee situation, the tipper and tippee are concerted actors, jointly engaging in fraudulent activity — the tipper breaches a fiduciary duty by disclosing inside information; the tippee trades on that information, knowing of the breach and without disclosing what he knows; and the tipper obtains ‘a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings.’ ” (quoting Dirks, 463 U.S. at 663, 103 S.Ct. 3255)); Obus, 693 F.3d at 289 (“Tippee liability requires that (1) the tipper breached a duty by tipping confidential information; (2) the tippee knew or had reason to know that the tip-pee improperly obtained the information (ie., that the information was obtained through the tipper’s breach); and (3) the tippee, while in knowing possession of the material non-public information, used the information by trading or by tipping for *319his own benefit.”); United States v. Falcone, 257 F.3d 226, 234 (2d Cir.2001) (Soto-mayor, J.) (“To support a conviction of the tippee defendant, the government was simply required to prove [ (1) ] a breach by ... the tipper, of a duty owed to the owner of the misappropriated information, and [ (2) ] defendant’s knowledge that the tipper had breached the duty.”); SEC v. Warde, 151 F.3d 42, 47 (2d Cir.1998) (listing elements similar to Jiau’s); Libera, 989 F.2d at 600 (“[T]he misappropriation theory requires the establishment of two elements: (i) a breach by the tipper of a duty owed to the owner of the nonpublic information; and (ii) the tippee’s knowledge that the tipper had breached the duty. We believe these two elements, without more, are sufficient for tippee liability.” (citation omitted)); Chestman, 947 F.2d at 570 (2d Cir.1991) (“[Conviction of a tippee] required the government to establish two critical elements — [ (1) ] [the tipper] breached a fiduciary duty ... and [ (2) ] [the tippee] knew that [the tipper] had done so.”).
Taken together, those cases are indistinguishable from this case. Chestman, Lib-era, Falcone, and Jiau, like this case, are criminal cases. Jiau and Warde, like this case, are classical-theory cases. See Jiau, 734 F.3d at 150; Warde, 151 F.3d at 45-46. Obus, like this case, involved tipping chains. See Obus, 693 F.3d at 288-89. Warde, like this case, involved a non-pecuniary benefit to the tipper from tipping. See Warde, 151 F.3d at 48-49. To be sure, the Court acknowledges the possibility that the Second Circuit may change course and require a new knowledge-of-benefit element. Until then, however, the Court must follow precedent as it is written. Cf. Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (“[A lower court] should follow the case which directly controls, leaving to [reviewing courts] the prerogative of overruling [their] own decisions.”).
Again, if benefit is a necessary sub-element of breach of duty, adding knowledge of benefit as a separate element would serve no purpose. Moreover, as the Court explained above, a rational jury could have found — and under the Court’s instructions was required to so find in order to find Defendant’s knowledge of the tippers’ breach — that Defendant knew of the tippers’ benefit. If, on the other hand, benefit is not included within breach of duty, then the Second Circuit has omitted knowledge of the tippers’ benefit by the tippee as a distinct element time and time again. The jury was therefore not required to find any knowledge of the tippers’ benefits beyond what was necessary to find knowledge of the tippers’ breaches. Accordingly, the Court rejects Defendant’s third argument.
D. Nexus Between Illegally Obtained Information and the Count Two Trades
Count Two of the Indictment alleges that Defendant engaged in a short sale of 167,368 shares of Dell common stock on August 18, 2008 based in whole or in part on inside information provided by Horvath. (Doc. No. 230.) Defendant argues that the evidence could not support a finding that that trade was motivated by inside information.
At trial, Horvath testified that he called Defendant and gave him Dell inside information on August 18, 2008. (Trial Tr. at 1052:2-1054:11). The government’s evidence showed that Defendant executed the short sale almost immediately after speaking to Horvath. (GX 41 (summary chart showing phone call-from Horvath to Stein-berg ending at 12:36 p.m. EST on August 18, 2008); GX 2505-C (reflecting short sales of Dell stock executed by Defendant *320on August 18, 2008 at 12:37 p.m. EST).) Based on that evidence, a jury could reasonably conclude that Horvath’s information at least partly motivated Defendant’s trade. Accordingly, the Court rejects Defendant’s fourth argument.5
E. Nexus Between Illegally Obtained Information and the Count Four Trades
Count Four of the Indictment alleges that Defendant engaged in a swap transaction equivalent to a short sale of 160,000 shares of NVIDIA common stock on May 5, 2009 based in whole or in part on inside information provided by Horvath. (Doc. No. 230.) Defendant argues that the evidence could not support a finding that that trade was motivated by inside information.
At trial, Horvath testified that he received NVIDIA inside information from Kuo on April 27, 2009 that would support a short position in NVIDIA. (Trial Tr. at 1307:10-1311:5.) He testified that he passed on information from Kuo to Defendant and told Defendant in April 2009 that the information came from someone inside NVIDIA. (Id. at 1300:17-1301:24.) Further, he testified that in his experience working with Defendant, Defendant would not normally “initiate a position” in a security without consulting with Horvath. (Id. at 1316:9-13.) In addition, the government provided evidence that on May 5, 2009, Defendant initiated a short position in NVIDIA stock. (Id. at 3299:25-3301:10; GX 76.) Based on that evidence, the jury could reasonably conclude that (1) Defendant consulted with Horvath before engaging in this transaction, (2) Horvath shared the inside information supporting a short position, and (3) the inside information partly motivated Defendant’s trading. Accordingly, the Court rejects Defendant’s fifth argument.
IV. CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED THAT Defendant’s Rule 29 motion for acquittal is DENIED. The Court will proceed with sentencing as previously scheduled on Friday, May 16, 2014 at 11:15 a.m.
SO ORDERED.
. The following facts are drawn from the Trial Transcript (Doc. Nos. 334, 336, 338, 340, 342, 344, 346, 348, 350, 352, 354, 357, 359, 361, 363, 365, 367 ("Trial Tr.”)) and from the trial exhibits. For purposes of this Memorandum and Order, all facts are stated in the light most favorable to the government. See United States v. Masotto, 73 F.3d 1233, 1241 (2d Cir.1996) (holding that a court reviewing a conviction for sufficiency of the evidence "must credit every inference that could have been drawn in the government’s favor” (internal quotation marks omitted)).
. The Court notes that, for the most part, it does not distinguish between precedent addressing the "classical” and “misappropriation” theories of insider trading. See generally United States v. O’Hagan, 521 U.S. 642, 651-653, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997) (describing the two theories).. “Under the classical theory of insider trading, a corporate insider is prohibited from trading shares of that corporation based on material non-public information in violation of the duty of trust and confidence insiders owe to shareholders.” Obus, 693 F.3d at 284. The misappropriation theory "targets persons who are not corporate insiders but to whom material non-public information has been entrusted in confidence and who breach a fiduciary duty to the' source of the information.” Id. Although the differences between the theories will sometimes be relevant — such as to whom the information and trading must be disclosed to avoid breaching a duty, see id. at 285 — the general legal analysis is the same under either theory. Indeed, different liability rules for the different theories would be untenable in light of the need for “guiding principiéis] for those whose daily activities must be limited and instructed by the SEC’s inside-trading rules.” Dirks v. SEC, 463 U.S. 646, 664, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983). As a result, the Second Circuit freely cites classical-theory cases when deciding misappropriation cases, and vice versa. For instance, Jiau is a classical-theory case, but it derives its elements from Obus, a misappropriation-theory case. See Jiau, 734 F.3d at 152-53.
. Defendant did not object to this aspect of the Court’s instruction on the definition of a breach of duty (see Doc. No. 309 at 20-22; Doc. No. 323), which was based on a nearly identical charge used in United States v. Newman and Chiasson, 12 Cr. 121(RJS) (see Doc. No. 219 at 4030:19-25).
. Willful blindness is a proxy for knowledge. See United States v. Ferrarini, 219 F.3d 145, 154 (2d Cir.2000). Arguably, however, the jury needed to find only that Defendant knew or should have known of the breach. See United States v. Goffer, 721 F.3d 113, 124 (2d Cir.2013) ("[A] liable tippee must know that the tipped information is material and nonpublic ... and the tippee knows or should know that there has been a breach of fiduciary duty.” (alterations and emphasis in original) (internal quotation marks omitted)); see also United States v. O’Hagan, 521 U.S. 642, 675, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997) (“To show that a tippee who traded on nonpublic information about a tender offer had breached a fiduciary duty would require proof not only that the insider source breached a fiduciary duty, but that the tippee knew or should have known of that breach.”); United States v. Rajaratnam, 802 F.Supp.2d 491, 497 n. 1 (S.D.N.Y.2011) (citing cases from other circuit courts); 3 Leonard B. Sand, et al., Modem Federal Jury Instructions: Criminal, Instruction 57-15 (2013) ("[The government] also must prove that the defendant knew or should have known that the insider from whom he received the confidential information had violated a trust relationship.”). Out of an abundance of caution, the Court applies the higher standard, requiring knowledge or willful blindness.
. The Court notes that the Second Circuit has recently reiterated that a person is guilty of insider trading if he or she trades in a security while "knowingly in possession of ... material nonpublic information” relevant to that security. See United States v. Rajaratnam, 719 F.3d 139, 159 (2d Cir.2013). Thus, even if the evidence did not establish that the information partially motivated Defendant’s trading — and the Court finds that a jury unquestionably could find that it did — his knowing possession of the information at the time of the trade would still be sufficient to support a conviction. Id. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224464/ | MEMORANDUM OPINION
ANDREWS, U.S. District Judge:
Presently before the Court are Defendant Microsoft’s Omnibus Motion for Summary Judgment (D.I. 298) and related briefing (D.I. 299, 365,467), and Plaintiff Robocast, Inc.’s Motion for Summary Judgment of No Unenforceability and No Unclean Hands (D.I. 295) and related briefing (D.I. 296, 360, 410). The Court has heard helpful oral argument on both motions. (D.I. 446).
I. BACKGROUND
This is a patent infringement action. Plaintiff Robocast, Inc. has accused Defendant Microsoft Corporation of infringing U.S. Patent No. 7,155,451 (“the ‘451 patent”). Microsoft contends that it does not infringe the ‘451 patent, and that the patent is invalid and unenforceable due to inequitable conduct. Robocast opposes these contentions.
II. LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party has the initial burden of proving the absence of a genuinely disputed material fact relative to the claims in question. Celotex Corp. v. Catrett, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Material facts are those “that could affect the outcome” of the proceeding, and “a dispute about a material fact is ‘genuine’ if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoying party.” Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir.2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The burden on the moving party may be discharged by pointing out to the district court that there is an absence of evidence supporting the non-moving party’s case. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.
The burden then shifts to the non-mov-ant to demonstrate the existence of a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Williams v. Borough of West Chester, Pa., 891 F.2d 458, 460-61 (3d Cir.1989). A non-moving party asserting that a fact is genuinely disputed must support such an assertion by: “(A)-citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials; or (B) showing that the materials cited [by the opposing party] do not establish the absence ... of a genuine dispute....” Fed. R. Civ. P. 56(c)(1).1
When determining whether a genuine issue of material fact exists, the court must view the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party’s favor. Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir.2007). A dispute is “genuine” only if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson, 477 U.S. at 247-49, 106 S.Ct. 2505; see Matsushita Elec. Indus. *326Co., 475 U.S. at 586-87, 106 S.Ct. 1348 (“Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no ‘genuine issue for trial.’ ”). If the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548.
III. DISCUSSION
There are four arguments set forth by Microsoft. First, that Microsoft does not directly infringe and that Robocast failed to timely disclose a doctrine of equivalents theory. Second, that Microsoft does not indirectly infringe. Third, that Robocast cannot assert priority to earlier filed applications and cannot show prior invention. Fourth, that Robocast cannot show willful infringement by Microsoft. Robocast sets forth two arguments, that the patent is not unenforceable due to inequitable conduct, nor is it unenforceable due to unclean hands. The arguments will be discussed in turn.
A. Direct Infringement of Video Playlist Functionality
Robocast accuses seven different products of infringement, which can be grouped into two categories: video playlists and changing tiles. Products with video play-list functionality include Bing.com, MSN. com, MSNBC.com, and the Xbox 360 ESPN app.2 Products with changing tile functionality include Windows 8 Xbox Music Software and Xbox 360 “Video” and “Home” channels. While some of the independent claims are asserted against only some products, claim 1 is illustrative:
A method for displaying on a user’s computer, content derived from a plurality of resources in an organized arrangement comprising the steps of:
creating a show structure of nodes, each node identifying a resource from a plurality of accessible resources;
without requiring user input, automatically accessing a plurality of said resources each of said resources identified by each of said nodes; and
displaying a content corresponding to each of said resources automatically in accordance with said show structure, wherein said step of creating further comprises the step of providing an interactively variable duration information, representing the duration within which a corresponding content to said resource is being displayed so as to enable a user to vary said duration.
'451 patent claim 1. Claim 37 is drawn to a “multidimensional show structure of nodes.” Claims 22 and 39 require that the “show structure is created in response to said search results received in response to said on-line search.”
1. A Reasonable Jury Could Find That “Each” Resource Is Displayed
Microsoft’s initial argument is that Robocast has not adduced evidence showing that the video playlist functionalities display, access, or retrieve “each” resource or content of a show structure. Essentially, the argument is that because the claims require “displaying a content corresponding to each of said resources,” see claims 1 and 37, the claim cannot be infringed until every video is played. Robocast responds that implicit in this argument is the assumption that the entire playlist is a “show structure of nodes.” Robocast contends that a portion of the playlist meets the “show structure of nodes” limitation, and therefore as long as that portion of the *327playlist is displayed, then the limitation is met. Alternatively, Robocast argues that the “each of said resources” in the “displaying” step refers not to each of said resources present in the show structure, but to “a plurality of resources” accessed in the previous step.
Microsoft’s non-infringement theory would result in a preposterous conclusion. Following Microsoft’s logic, infringement could only be found after the last video in the show structure finished playing, or at least when the last video started playing. If the show structure were infinite, then there could never be infringement. The claimed methods do not require that every resource be “displayed.”3 A reasonable jury could find that where there is more than one node, a show structure is present.
Microsoft also argues that infringement only occurs when the user views each video, and that Robocast cannot meet this evidentiary burden. Yet the claims do not require “viewing,” they require “displaying.” As long as the accused functionality can play more than one node, then infringement could be found. Whether someone views the content is not required by the claims and therefore irrelevant.
2. A Reasonable Jury Could Find That The Durational Requirement Is Met
During claim construction, the Court construed “show structure of nodes” as “a structure that is arranged for the display of content by specifying one or more paths through a plurality of nodes.” The Court further required that the “show structure of nodes specifies the duration of any display.” (D.I. 246 at 2). Additionally, the Court construed “node” as “an identifier of a resource that includes an address to the resource and the duration for which the resource’s content is to be presented by default.” (D.I. 246 at 16). As an initial matter, Robocast is correct in asserting that the Court did not intend to include a separate durational requirement in the term “show structure of nodes” separate from the construction of “node.” The node itself sets the duration, and the show structure is made up of multiple nodes and a pathway through those nodes.
Microsoft argues that because the show structure of nodes “specifies the duration of any display,” the show structure of nodes must have a causal relationship on the duration parameter. Specifically, because the video clips themselves contain duration parameters, the show structure cannot specify the duration, because the person who made the video specified the duration. However, at some point the video player must know when to move on to the next video. There must be some sort of durational information which alerts it to queue up the next video and start playing. While this durational information is determined by the creator of the content, it is nevertheless durational information. The Court cannot say as a matter of law that the accused video playlist functionality does not contain the required durational information.
Microsoft has asked that the Court construe its construction of “specify,” presumably to require its proposed causal relationship. The Court has no obligation to further construe its constructions,4 and declines to engage in such circular endeavors.
3. A Reasonable Jury Could Find That A Scrubber Bar Meets The Limitation Of Interactively Variable Duration Information
Claim 1 requires “interactively variable duration information,” which has *328been construed as “a parameter specifying how long a content is to be displayed by default before a subsequent content is displayed, where the viewer of the content can change the parameter.” (D.I. 246 at 22). Robocast contends that the “scrubber bar,” which allows a user to select a particular point in a video, meets this limitation. Microsoft sets forth numerous arguments for why the accused products do not meet this limitation. Underpinning all these arguments is Microsoft’s contention that there can only be one duration parameter, and that a user cannot vary any duration parameter in the show structure. (D.I. 467 at 6). However, this assumption is not necessarily true. There is a requirement of duration information associated with each node. Claim 1 separately refers to “interactively variable duration information” as a distinct limitation apart from the nodes themselves. A jury could find that changing the position of the scrubber bar changes the duration information present in the video, as it is the length of the video which satisfies the durational requirement.
As for the specific arguments, Microsoft points out three reasons for why the distance between the position of the scrubber and the end of the playback line cannot be interactively variable duration information. First, that the distance is not a “parameter,” because a parameter is a “variable that must be given a specific value.” (D.I. 246 at 23). Second, that Robocast has not alleged that the scrubber bar is provided contemporaneously with the creation of the show structure. Third, that Robocast does not explain how the distance corresponds to the default duration for the video.
The distance of the scrubber bar may be a “parameter.” The distance has a numerical component, which is a specific value. That the numerical component changes as the video plays back does not change the fact that at a particular point, there is a specific value associated with the distance of the scrubber bar. As for Microsoft’s second argument, the fact that the scrubber bar does not appear until video playback does not mean that the “interactively variable duration information” is not “provided” contemporaneously with the creation of the show structure. The length of the video may be the “interactively variable duration information.” That it is not variable prior to playback does not mean it is not variable at a later stage. As for Microsoft’s third argument, the position of the scrubber bar corresponds to the default duration when playback is started.
Microsoft also argues that Robo-cast cannot put forth a doctrine of equivalents argument with regard to this limitation, both because it would be untimely and because it is estopped by the prosecution history. As for the timeliness argument, Robocast’s doctrine of equivalents arguments are based on the Court’s claim construction rulings, and Microsoft was on notice. As for the prosecution history es-toppel issue, it appears that the “interactively variable duration information” was added in order to differentiate the claimed invention from the prior art. Therefore, this limitation must be present in any infringing product. It is unclear how the doctrine of equivalents would allow Robo-cast to prove infringement without proving that the accused products contain some sort of “interactively variable duration information.” In any case, proving infringement under the doctrine of equivalents is a question of fact, and is therefore best left to the jury. Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., 559 F.3d 1308, 1312 (Fed.Cir.2009).
4. Bing.com and MSN.com Do Not Infringe Claims 22 and 39
Claims 22 and 39 require the step of “automatically creating and storing a *329show structure of nodes ... in response to said search results received in response to said online search.” While Robocast argues that the claims do not require a particular order of method steps, this limitation would be nonsensical without a particular order. The claim requires that a show structure is made “in response” to search results, which are themselves received “in response” to an online search. Something cannot be “in response” to something that has yet to occur. Claims 22 and 39 therefore require that the show structure be created after a search has returned search results.
Microsoft’s non-infringement argument is that Bing.com and MSN.com do not create the show structure after a search is performed, but that show structures which have been previously created are displayed in response to the search. In the case of Bing.com and MSN.com Entertainment, when a user performs a search, the search results are presented as thumbnails. (D.I. 301 at 10-11). While Robocast disputes this, see D.I. 365 at 19, it is clear that the search results display static images. (D.I. 376 Ex. 4 and 5). When a user clicks on one of the thumbnails, the video is played. See id. Static images cannot form a show structure, because a show structure requires durational information. Static images have an infinite duration, and cannot be nodes. Without nodes, there is no show structure. Accordingly, for a show structure to be created in response to a search, there must be something else that is the show structure.
Robocast appears to argue that because videos are played after clicking on a thumbnail, the videos that are played form the show structure. This argument fails for at least two reasons. For Bing.com and MSN.com Entertainment, an algorithm identifies related videos. The video playlist is not created in response to the search, but has been previously created. (D.I. 301 at 4, 11). For these types of functionalities, the show structure is not created in response to the search results. Therefore, accused products of this type do not infringe claims 22 or 39.5
In the case of MSN “Movie Trailers,” a search returns thumbnail images of movie posters. (D.I. 376 Ex. 4). After clicking on one of the thumbnails, a trailer corresponding to that movie is played. Id. Afterwards, a trailer corresponding to the next movie is played. Id. While this might meet the limitation requiring that a show structure be created in response to search results, it does not infringe for another reason.6 The claims also require, “without requiring user input accessing each of said resources identified by each of said nodes.” (Claims 22 and 39). The MSN “Movie Trailers” do not play without a user clicking on the poster thumbnail. (D.I. 376 Ex. 4). Therefore, MSN “Movie Trailers” does not infringe claims 22 or 39.7
B. Direct Infringement of Changing Tile Functionality
The second category of accused products is changing tile functionality. These products contain two groups, the first being the Xbox 360 “Home” and “Video” channels, and the second being the Xbox Music software. Many of the non-infringement arguments for these products are the same as for the first category, and are dealt with *330above.8 Microsoft makes three arguments in regard to this category of products. The first is that the products cannot infringe because they use a global duration, which negates the requirement of a node containing duration information. The second is that the Xbox 360 channels cannot infringe because only one tile is dynamic, and because the static tiles are not nodes, there cannot be a multidimensional show structure. The third is that Xbox Music software cannot infringe because successive images are determined randomly, and therefore there cannot be a path through the nodes.
1. A Reasonable Jury Could Find That a Node May Have a Global Duration
All of the accused changing tile products contain a global duration. (D.I. 301 at 25,27-28). Duration is not set on a per-resouree basis. Because the Court’s claim construction, requires that a node include both an address and a durational element, a global durational element separate from the node cannot be a substitute for the durational element that must be part of a node. However, the concept of node is an elusive one. By their very definition, nodes contain multiple parts. Where those parts are stored is not necessarily dispositive of whether the node exists. The Court cannot say as a matter of law that the existence of a global durational value means that the tile products do not contain nodes with the required dura-tional element.
Of course, given the Court’s claim construction, a doctrine of equivalents argument might be available as an alternative to literal infringement, i.e., that a global duration is the equivalent of a node with a per resource duration. Microsoft argues that Robocast has not advanced a doctrine of equivalents theory with respect to the Xbox 360 Home and Video channels. (D.I. 299 at 29).9 As for Xbox Music, Microsoft argues that the all-elements rule precludes Robocast from arguing the doctrine of equivalents because it would “vitiate a particular claim element.” (D.I. 299 at 29). This argument falls short. The specification itself contemplates a global value. ('451 patent 15: 14-17). The Court does not see how an equivalents theory which results in something which the specification itself contemplated would “vitiate” a claim element.
2. The Accused Xbox 360 “Home” and “Video" Channels Do Not Have a “Multidimensional” Show Structure of Nodes
The Xbox 360 Home and Video Channels only display one tile which changes over time. The remaining tiles are static. (D.I. 301 at 27). Microsoft argues that static tiles cannot be nodes because they do not contain duration information, and therefore there cannot be a “multidimensional” show structure of nodes, because there is only one node present. This argument is persuasive. Static images have no duration, and therefore they cannot be nodes. With only one node, the show structure cannot be multidimensional.
Robocast argues that because the last node in a path may be infinite, that some nodes need not contain duration information. The fact that the patent contemplated displaying content that is not a node does not negate the durational requirement of node. The claims need not be coextensive with every embodiment in the *331specification. A static image is not a node, and cannot form the basis for a “multidimensional show structure of nodes.” Because these accused functionalities do not contain a “multidimensional show structure of nodes,” they cannot infringe claim 37. Summary judgment for Microsoft on the Xbox 360 “Home” and “Video” channels is granted.
3. A Reasonable Jury Could Find That Xbox Music Contains a Path
The accused Xbox Music software displays successive images randomly. The particular image is not selected until just before the image transitions. Microsoft argues that because of this the software does not contain a show structure “specifying one or more paths through a plurality of nodes.” This is not persuasive. Again Robocast argues that the asserted method claims do not require a particular order of the steps, but here the argument holds weight. The entire show structure need not be created before any of it can be displayed. The path can be continually updated and changed during the step of displaying the nodes.
C. Indirect Infringement
Microsoft contends that Robo-cast’s infringement theories are largely relegated to induced and contributory infringement, because Microsoft does not perform all of the steps of the claimed methods. (D.I. 299 at 33). Direct infringement of a method claim generally requires that one entity performs all of the steps, although direct infringement can also be found when some of the steps are performed by someone “acting pursuant to the accused infringer’s direction or control.” Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1307 (Fed.Cir.2012) cert. granted, — U.S. -, 134 S.Ct. 895, 187 L.E.2d 701 (2014)); see also BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed.Cir.2007). Microsoft, however, has not moved for summary judgment on this issue, and I therefore limit my analysis to induced and contributory infringement.10
1. A Reasonable Jury Could Find Microsoft Liable For Contributory Infringement
Microsoft makes two arguments against a finding of contributory infringement. The first is that Robocast cannot show that the accused functionalities are not capable of “substantial nonin-fringing use,” and the second is that the accused functionalities are not a “component,” “material,” or “apparatus” as required by 35 U.S.C. § 271(c). As for whether Robocast has met its burden of showing that the accused functionalities have no substantial non-infringing use, this is a factual question reserved to the jury. Robocast does not need to survey users in order for the jury to determine that there are not a substantial number of users who only watch one video. As for the arguments regarding the changing tile functionality, the fact that the accused functionality is aesthetic does not preclude a finding of infringement.
Microsoft’s second argument is a much closer issue. Microsoft contends that the accused functionalities are intangible, and because § 271(c) predicates liabili*332ty on the sale of tangible things, there can be no contributory infringement. In support of this proposition, Microsoft cites to Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 447-52, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007), where the Supreme Court held that disembodied software code did not constitute a component under § 271(f). Microsoft also cites to a district court case where the court extended the logic of AT & T and concluded that electronically published software is not a material or apparatus under § 271(c). See Veritas Operating Corp v. Microsoft Corp., 562 F.Supp.2d 1141, 1275 (W.D.Wash.2008).
This argument fails for two reasons. The first is that it is illogical. The Supreme Court drew a distinction between intangible software in the abstract and software on some medium, drawing an analogy to the notes of Beethoven’s Ninth Symphony versus a copy of the sheet music. AT & T, 550 U.S. at 447-48, 127 S.Ct. 1746. While the Veritas court assumed that electronically published software was the same as purchasing the notes, such purchases require a transfer between electronic media. The notes are written in one location, purchased, and written on the purchaser’s desired location. To differentiate between copying between two computers and physically sending a disk, which is itself a copy, is not persuasive. The second is that the Federal Circuit rejected this very argument in Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1321 (Fed.Cir.2009), stating, “We need only respond that the Supreme Court in Microsoft did not address the meaning of ‘material or apparatus’ in § 271(c).”
2. A Reasonable Jury Could Find Microsoft Liable For Induced Infringement
Microsoft contends that because a good faith belief of non-infringement or invalidity can preclude a finding of induced infringement, it is entitled to summary judgment on this issue. Robocast replies that it need only proffer evidence that Microsoft knew of the ‘451 patent and instructed its customers to use the accused products in an infringing manner. This is a quintessential jury question.
D. Priority and Prior Invention
The ‘451 patent claims priority to a parent application, number 08/922,063, filed on September 2, 1997, as well as a provisional application, number 60/025,360, filed on September 3, 1996. During prosecution of the ‘451 patent, the inventor asked the Examiner to make a priority finding for claim 1. The Examiner made the desired finding, establishing a priority date of September 3, 1996. Additionally, Robocast asserts that it is entitled to an earlier invention date. In order to establish an earlier date, Robocast relies on inventor testimony, as corroborated by a notebook entry dated January 4, 1995 and a letter dated June 14,1996.11
1. A Reasonable Jury Could Find That Robocast is Entitled to Claim Priority
In order to establish priority to previously filed applications, “each application in the chain leading back to the earlier application must comply with the written description requirement of 35 U.S.C. § 112.” Lockwood v. American Airlines, Inc., 107 F.3d 1565, 1571 (Fed.Cir.1997). The test for sufficiency of written description is “whether the disclosure of the application relied upon reasonably conveys to those skilled in the art that the inventor' had possession of the claimed subject matter as of the filing date.” Ariad Pharm., Inc. v. Eli Lilly & Co., 598 *333F.3d 1336, 1351 (Fed.Cir.2010). Additionally, “claims are awarded priority on a claim-by-claim basis.” Lucent Technologies, Inc. v. Gateway, Inc., 543 F.3d 710, 718 (Fed.Cir.2008) (internal citations omitted).
Microsoft contends that the earlier filed applications do not provide written description support for the limitation “show structure of nodes,” because the Court construed this term to require “one or more” paths through a plurality of nodes, and the earlier applications only disclose one path. Robocast makes four arguments in response. First, that Microsoft cannot challenge priority without first putting forth a prima facie case of invalidity. Second, that the Patent Office has already determined that the “show structure” limitation is supported by the earlier-filed applications. Third, that Microsoft applies the wrong test for written description. Fourth, that there is a genuine issue of material fact as to whether the earlier-filed applications give support for the “show structure” limitation.
I agree that there is a genuine issue of material fact that precludes a finding of summary judgment on this issue. See Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1479 (Fed.Cir.1998) (“Whether a specification complies with the written description requirement ... is a question of fact.”). I assume for the sake of argument that Microsoft has set forth a prima facie case of invalidity. As to whether the Patent Office has already determined that the “show structure” limitation is supported by the earlier-filed applications, I agree with Robocast that the PTO made that determination. While priority determinations are made on a claim by claim basis, the limitation at issue was present in claim 1, for which priority was granted. As for the fact that the Examiner did not have the Court’s claim construction when making the priority determination, I note that the specification states that “[a] show structure is defined by one or more paths that are spanned through these nodes.” ('451 patent at 3:4-6).
As for the dispute regarding the correct test for written description, I see very little difference between the parties’ proposed tests. Both sides cite to Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed.Cir.2010), yet Robocast emphasizes that the written description requirement does not require literal disclosure. I agree. The test is what a person of ordinary skill in the art would understand to be in the inventor’s possession. Id.
This dispute is further complicated by the fact that the term “show structure of nodes” was not present in either of the earlier filed applications. Microsoft does not appear to argue that the previous applications fail to provide support for a show structure corresponding to a single path, only that they fail to provide support for a multiple path show structure. There are disputed factual issues, and, at this juncture, the Court cannot rule in Microsoft’s favor. First, Robocast’s expert offered his opinion that a disclosure of two open windows was consistent with a multiple path show structure of nodes. (D.I. 365 citing Almeroth Report ¶ 187). Second, it is possible that a disclosure of a single path was sufficient to convey to those skilled in the art that the inventor had possession of a multiple path embodiment. Lastly, the patent differentiates between “show structures” and “multidimensional show structures.” (‘451 patent claims 1 and 37). It is certainly conceivable that multiple path show structures are limited to “multidimensional” show structures, such that the claims containing single dimension show structures have priority and the claims containing *334multidimensional show structures do not have priority. These issues will be decided by the jury.
2. A Reasonable Jury Could Find That Robocast Has Shown Prior Invention
A patentee may establish a date of invention prior to the filing date by showing an earlier conception and diligence through to the patent filing date. Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1577 (Fed.Cir.1996). Microsoft contends that Robocast cannot show a date of prior invention because the corroborating documents do not disclose multiple path show structures of nodes and because there is insufficient evidence of diligence.
As for whether the corroborating documents disclose a multiple path show structure, I previously stated that the “real issue is whether the corroborating documents provide enough evidence for the jury to believe [inventor] testimony, not whether the documents themselves are enabling disclosures.” (D.I. 432). I therefore leave it to the jury to decide whether Mr. Torres was in possession of the claimed invention prior to the filing date. As for diligence, “[t]he question of reasonable diligence is one of fact.” Brown v. Barbacid, 436 F.3d 1376, 1379 (Fed.Cir.2006). Microsoft’s arguments are thin and sufficiently contested by Robocast to make this a factual dispute for the jury.
E. Willful Infringement
In order to show willful infringement, “a patentee must show by clear and convincing evidence that the in-fringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed.Cir.2007) (en banc). Seagate sets forth a two part test with both an objective and subjective component. “If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Id. Seagate left open the application of this standard. Id. However, in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 682 F.3d 1003, 1007 (Fed.Cir.2012), the court held “that the objective determination of recklessness, even though predicated on underlying mixed questions of law and fact, is best decided by the judge as a question of law subject to de novo review.”
The parties spend much of their briefing debating whether Robocast can make a showing of pre-suit willfulness. Microsoft cites to State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed.Cir.1985), which describes the requisite knowledge for a finding of willful infringement:
To willfully infringe a patent, the patent must exist and one must have knowledge of it. A “patent pending” notice gives one no knowledge whatsoever. It is not even a guarantee that an application has been filed. Filing an application is no guarantee any patent will issue and a very substantial percentage of applications never result in patents. What the scope of claims in patents that do issue will be is something totally unforeseeable.
In response, Robocast points to the numerous communications between Mr. Torres and Microsoft from 1996 to 2001 for the proposition that “a jury could reasonably conclude that Microsoft should have undertaken affirmative investigation of its potential infringement of Robocast’s patents.” (D.I. 365 at 50). Robocast cites to Broadcom Corp. v. Qualcomm, Inc., 543, *335F.3d 683, 698 (Fed.Cir.2008), where the Federal Circuit endorsed jury instructions allowing the jury to consider whether the defendant sought a legal opinion as one factor in the willful infringement determination. Broadcom, however, is inapposite as the defendant had knowledge of the patents. 543 F.3d at 697 (“Qualcomm contends that it did not obtain non-infringement opinions because it had procured invalidity opinions for each relevant patent.”).
There appears to be no controlling case law for the proposition that Microsoft was obligated to have undertaken an affirmative investigation to determine if Mr. Torres’ application had matured into a patent. In fact, in Seagate the court reemphasized “that there is no affirmative obligation to obtain opinion of counsel.” 497 F.3d at 1371. It seems contrary to waive the requirement for a non-infringement opinion when the defendant has knowledge of the patent and yet require a defendant to undertake a search to see if a patent existed in the first place.
While neither side cites to it, Tomita Technologies USA, LLC v. Nintendo Co., Ltd., 2012 WL 2524770 (S.D.N.Y. June 26, 2012), presents an interesting contrast. There, an inventor demonstrated his invention to a group of Nintendo employees and told them that he had applied for a patent in Japan and under the PCT. Id. at *8. Those same employees helped to develop the Nintendo 3DS, which was the very product accused of infringement. Id. at *10. Furthermore, there was evidence that Nintendo “from time to time” conducted patent clearance searches before introducing a product. Id. The court held that requiring actual knowledge of the patent at issue would “allow even copiers to shelter themselves from liability for willfulness merely by avoiding confirmation of what they, in essence, already knew.” Id.
Here, however, the record evidence does not rise to such a level. The only interactions between Robocast and Microsoft that could possibly form a basis for a finding of pre-suit willfulness are the discussions between Mr. Torres and Microsoft employees involving the evaluation of Robocast’s technology. However,, none of the interactions mentioned in the briefs would support a finding of willfullness. The fact that Mr. Torres met with MSNBC and now accuses the MSNBC, com website is merely coincidental. The meeting with MSNBC that Robocast points to was limited to asking permission to use MSNBC content in a Robocast demonstration. (D.I. 367-2 at 21). During oral, argument, Robocast mentioned that there was evidence that Mr. Torres had sent a letter to Microsoft that identified the patent application number, that the accused playlist functionality was copied from the patent, that the people Mr. Torres met with at Microsoft were responsible for the accused functionality, and that these people were notified that clear embodiments from the patent had found their way into Microsoft’s product. (D.I. 435 at 44). Because the briefs did not mention these allegations in detail, the Court asked for a letter pointing out where in the record support for these allegations could be found. While Robocast submitted such a letter, it did not offer sufficient support for these allegations.
The letter which Robocast submitted ended with the conclusion that the “evidence clearly demonstrates that: (1) Microsoft had significant exposure to and knowledge of Robocast’s technology; and (2) Robocast had alerted Microsoft on multiple occasions to the pendency of Ro-bocast’s patent.” (D.I. 435 at 10). As discussed earlier, even if Microsoft knew the patent application number, it would not form a basis for a finding of willfulness. *336As to the first assertion, this proves the point. Microsoft had exposure to Robo-cast’s technology. Yet there is no evidence in the record that Microsoft used the specific technology which Robocast demonstrated. If, as in Tomita, Microsoft had copied the identical technology, then it might for a basis for a finding of willfulness. Here, the accused video playlists are entirely distinct from the web page slideshows which were demonstrated to Microsoft. Just because Microsoft was shown one embodiment does not put them on notice to investigate if distinct technologies might read on the patent which later issued from a demonstration of one particular embodiment.
As for post-suit willfulness, I note that:
[I]n ordinary circumstances, willfulness will depend on an infringer’s prelitigation conduct. It is certainly true that patent infringement is an ongoing offense that can continue after litigation has commenced. However, when a complaint is filed, a patentee must have a good faith basis for .alleging willful infringement. So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused in-fringer’s post-filing conduct is reckless,a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement. A patentee who does not attempt to stop an accused infringer’s activities in this manner should not be allowed to accrue enhanced damages based solely on the in-fringer’s post-filing conduct. Similarly, if a patentee attempts to secure injunc-tive relief but fails, it is likely the infringement did not rise to the level of recklessness.
Seagate, 497 F.3d at 1374 (citations omitted). Robocast did not move for a preliminary injunction. Microsoft’s defenses are reasonable. See Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed.Cir.2010) (holding that the objective prong of willfulness was not met where a defendant’s defenses were reasonable). Allowing a finding of willfulness based on post-suit conduct would put enhanced damages at issue whenever a defendant opted to deny infringement and take the case to trial. See LML Holdings, Inc. v. Pacific Coast Distributing Inc., 2012 WL 1965878, at *5 (N.D.Cal. May 30, 2012). Allegations of willfulness based solely on conduct post-dating the filing of the original complaint are insufficient. The conduct before suit was filed does not create a triable issue as to willfulness; the filing of the suit does not change “non-willfulness” into willfulness.
F. Inequitable Conduct
Microsoft proposes two theories for why the ‘451 patent is unenforceable, both of which rely on the same set of facts. The first is that the ‘451 patent is unenforceable due to inequitable conduct. The second is that the ‘451 patent is unenforceable due to unclean hands arising from litigation conduct. Robocast contends that both of these theories fail as a matter of law. A brief factual background is in order.
For the purposes of deciding this issue I take as true the following allegations.12 The inventor filed provisional application number 60/025,360 (“the provisional”) on September 3, 1996. The inventor filed application number 08/922,063 (“the ‘063 application”) on September 2, 1997, claiming priority to the provisional. The inventor filed application number 09/144,906 *337(“the ‘906 application”) on September 1, 1998, claiming priority to both the provisional and the ‘063 application as a continuation in part. The inventor prosecuted both non-provisional applications.
In November of 1999, in response to a rejection of the ‘063 application over Richardson in view of Davis, the inventor, Mr. Torres, submitted a false declaration to the PTO attempting to swear behind the Richardson reference. The Examiner did not find the declaration persuasive, and continued to reject the claims of the ‘063 application, but in reliance on other references. The ‘063 application was subsequently abandoned in January 2002. The Richardson reference was disclosed, see PTO-1449 dated December 23, 1999, and overcome during prosecution of the ‘451 patent without any reliance on the false declaration. The ‘906 application eventually issued as the ‘451 patent on December 26, 2006.
Microsoft contends that the inequitable conduct in the parent application in November 1999 renders the child unenforceable, even though the inequitable conduct occurred after the child application was filed in 1998. I assume that the conduct indeed was material and would have caused the ‘063 application to be unenforceable. Microsoft relies on the “doctrine of infectious unenforceability”13 for the contention that the ‘451 patent is also unenforceable. See Agfa Corp. v. Creo Products Inc., 451 F.3d 1366, 1379 (Fed.Cir.2006) (explaining that infectious unen-forceability -occurs when inequitable conduct renders unenforceable claims in a related application).
The law of inequitable conduct grew out of the unclean hands doctrine, and “is no more than the unclean hands doctrine applied to particular conduct before the PTO.” Consol. Aluminum, Corp. v. Foseco Int’l Ltd., 910 F.2d 804, 812 (Fed.Cir.1990). The unclean hands doctrine applies where:
[S]ome unconscionable act of one coming for relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation. [Courts] do not close their doors because of plaintiffs misconduct, whatever its character, that has no relation to anything involved in the suit, but only for such violations of conscience as in some measure affect the equitable relations between the parties in respect of something brought before the court for adjudication. They apply the maxim, not by way of punishment for extraneous transgressions, but upon considerations that make for the advancement of right and justice. They are not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion.
Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 245-46, 54 S.Ct. 146, 78 L.Ed. 293 (1933). In the context of inequitable conduct before the Patent Office, that conduct “renders unenforceable all patent claims having an immediate and necessary relation to that conduct, regardless of whether the claims are contained in a single patent or a series of related patents.” Truth Hardware Corp. v. Ashland Products, Inc., 2003 WL 22005839, at *1 (D.Del. Aug. 19, 2003).
Indeed, the Federal Circuit recognizes that “inequitable conduct early in the prosecution may render unenforceable all claims which eventually issue from the same or a related application.” Agfa, 451 F.3d at 1379. Of course, later applications are “not always tainted by the inequitable *338conduct of earlier applications.” Id. For instance, in Baxter Int’l, Inc. v. McGaw, Inc., 149 F.3d 1321 (Fed.Cir.1998), the court distinguished divisional applications, noting that:
[W]here the claims are subsequently separated from those tainted by inequitable conduct through a divisional application, and where the issued claims have no relation to the omitted prior art, the patent issued from the divisional application will not also be unenforceable due to inequitable conduct committed in the parent application.
Id. at 1332. There are two ways to look at the distinction drawn in Baxter. The first is that the omitted art itself was not material to the claims in the divisional, and therefore the inequitable condhct did not infect the divisional. This is merely another way of saying that the conduct itself did not constitute inequitable conduct in the divisional. Requiring that the inequitable conduct itself have a causal effect, on the issuance of the claims at issue would render the doctrine of infectious unenforce-ability inapplicable in the present case, since they were on a separate track before the inequitable conduct occurred.
The second way to approach the Baxter case, and the way I approach it, is that inequitable conduct infects the invention itself, and all claims which form a part of that invention. A divisional application is drawn to a different invention, and different inventions do not share an “immediate and necessary” relation to each other. Continuation applications, however, relate to the same invention. If a patentee who has engaged in inequitable conduct included the invention in one application, all the claims would be unenforceable. If the same patentee split the claims into two applications, why should the result be any different? To hold otherwise would fly in the face of the rule that inequitable conduct renders all claims unenforceable, “not just the particular claims to which the inequitable conduct is directly connected.” J.P. Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1561 (Fed.Cir.1984); see also In re Clark, 522 F.2d 623, 626 (CCPA 1975) (“[Inequitable conduct] goes to the patent right as a whole, independently of particular claims”.).
In its brief, Microsoft argues that because the claims in the ‘451 patent are similar to those in the ‘063 application, the entire ‘451 patent can be held unenforceable by inequitable conduct during the prosecution of the ‘063 application. I need not decide that issue at this point. It appears that at a minimum some claims in the ‘451 patent indeed could have been included in the ‘063 application. If that is the case, then at the very least those claims could be unenforceable. The extent to which the inequitable conduct in the ‘063 application actually infects the ‘451 patent is best left for trial, where the facts can be more clearly developed.
While the exact contours of any infectious unenforceability lack clarity, the issue of unclean hands is much clearer. Microsoft alleges that Mr. Torres fabricated evidence. If Robocast relies on that evidence to obtain an earlier date of conception, knowing that it is fabricated, that can form the basis for litigation misconduct. See Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3d 1369, 1372 (Fed.Cir.2001) (“affirming dismissal based on unclean hands where patentee submitted fabricated evidence in discovery to support earlier invention date); Intamin, Ltd. v. Magnetar Technologies Corp., 623 F.Supp.2d 1055, 1076 (C.D.Cal.2009) (dismissing suit under unclean hands doctrine based on forged assignment documents). The fact that the documents might have been forged before the start of litigation is *339irrelevant. It is the reliance on forged documents that would be misconduct.
IV. CONCLUSION
For the reasons above, Microsoft’s Omnibus Motion for Summary Judgment (D.I. 298) is granted in part and denied in part. Plaintiff Robocast, Inc.’s Motion for Summary Judgment of No Unenforceability and No Unclean Hands (D.I. 295) is denied. An appropriate order will be entered.
ORDER
Presently before the Court is Defendant Microsoft’s Omnibus Motion for Summary Judgment (D.I. 298) and related briefing (D.I. 299, 365, 467). Also before the Court is Plaintiff Robocast, Inc.’s Motion for Summary Judgment of No Unenforceability and No Unclean Hands (D.I. 295) and related briefing (D.I. 296, 360, 410). For the reasons discussed in the accompanying Memorandum Opinion, it is hereby ORDERED:
Defendant’s Motion (D.I. 298) is GRANTED IN PART and DENIED IN PART.
Plaintiffs Motion (D.I. 295) is DENIED.
. There is an extensive record in this case. To the extent a party does not properly oppose factual assertions, the Court considers the factual assertion to be undisputed and a basis on which to grant summary judgment. Fed. R. Civ. P. 56(e)(2) & (3).
. Robocast no longer alleges infringement for Xbox 360 "Suggest a movie." (D.I. 365 at 6).
. The same logic applies to "accessed” and "retrieved.”
. The Court notes that Microsoft proposed the use of "specify.” (D.I. 137 at 21).
. Thus, they do not infringe dependent claims 23-28.
. This reasoning also applies to the Bing.com and MSN.com Entertainment functionalities.
.They also do not infringe dependent claims 23-28.
. For instance, the necessity for "each” resource to be displayed and the timeliness of the doctrine of equivalents.
. Given Robocast does not dispute this, I accept it as accurate.
. Microsoft contends that there can be no liability for indirect infringement prior to the date this suit was filed, because Microsoft was not aware of the '451 patent. Robocast does not appear to contest this issue, pointing out that Microsoft would still be liable after initiation of the suit. (D.I. 365 at 34). Thus, it is the Court’s understanding that indirect infringement liability and damages do not exist before this lawsuit was filed in December 2010.
. Microsoft disputes the authenticity of these documents. (D.I. 299 at 40 n. 16).
. Robocast of course does not concede that there was any inequitable conduct.
. District Courts refer to the “doctrine "of infectious unenforceability.” To date, the Federal Circuit has not adopted that moniker as its own. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224465/ | MEMORANDUM OPINION
ROBINSON, District Judge
I. INTRODUCTION
Plaintiff Donald D. Parked (“plaintiff’), an inmate at the Howard R. Young Correctional Institution, Wilmington, Delaware, filed his complaint pursuant to 42 U.S.C. § 1983.1 He proceeds pro se and has been granted leave to proceed without prepayment of fees. Presently before the court are defendants’ motions for summary judgment and plaintiffs oppositions thereto. (D.I. 222, 224, 226, 237, 240, 242) The court has jurisdiction pursuant to 28 U.S.C. § 1331. For the reasons discussed, *344the court will grant defendants’ motions for summary judgment.
II. PROCEDURAL AND FACTUAL BACKGROUND
This case proceeds on the complaint (D.I.2) and the first amended complaint (D.I. 66).2 During' the relevant time-frame, medical contract service providers Correctional Medical Services, Inc. (“CMS”)3 and Correct Care Services, LLC (“CCS”) provided medical care to the Delaware Department of Correction (“DOC”). Also during the relevant time-frame, plaintiff was housed at the James T, Vaughn Correctional Center “VCC”), Smyrna, Delaware. Count I alleges that Commissioner Carl Danberg (“Danberg”) violated plaintiffs Eighth Amendment rights when he: (a) renewed a contract with CMS as a means of saving money knowing of CMS’ failure to provide constitutionally adequate care to inmates at the VCC; (b) chose to retain CCS as the new medical care provider; and (c) implemented or maintained policies or practices that denied or delayed necessary medical and mental health needs. (D.I. 2, ¶75, D.I. 66, ¶¶ 82, 87) Plaintiff also sued Warden Perry Phelps (“Phelps”), Major Michael Costello (“Costello”) as security chief, Deputy Warden David Pierce (“Pierce”)4 as responsible for security matters, and Deputy Warden Christopher Klein (“Klein”) as responsible for medical issues, all of whom allegedly subjected plaintiff to cruel and unusual punishment by implementing, maintaining and/or acquiescing to policies, practices or customs that deprived plaintiff of medical or mental health care, basic human necessities, and undue pain and humiliation. (D.I. 2, ¶¶ 70-73, 77, D.I.55, ¶¶ 83-85, 87) Plaintiff sued CMS and CCS for violating his Eighth Amendment rights when they enacted policies, customs, or practices with regard to plaintiffs medical and mental health treatment and care. (D.I. 2, ¶ 76; D.I. 66, ¶¶ 68-75, 77, 87) Finally, plaintiff sued Nurse Betty Bryant (“Bryant”) for allegedly violating his Eighth Amendment rights when she refused to examine his infected arm and provide needed treatment (D.I. 2 at ¶ 66), and Nurse Chris Damron (“Damron”) for allegedly committing assault and battery under Delaware law when she maliciously twisted and yank.ed plaintiffs arm through a door slot causing immense pain and contributing to his preexisting condition (D.I. 2 at ¶ 67). Count II alleges that Danberg, Phelps, Pierce, Costello, Captain M. Rispoli (“Ris-poli”), Klein, CMS, and CCS violated plaintiffs due process rights under the Four*345teenth Amendment by refusing to treat him while he was housed in isolation and housed him in atypical conditions in the infirmary. (D.I. 2, ¶¶ 79-80, D.I. 66, ¶ 89) Plaintiff seeks compensatory and punitive damages, as well as injunctive relief.
CMS provided medical services to the DOC from July 1, 2005 through June 30, 2010. See Williamson v. Correct Care Services LLC, 2010 WL 5260787, at n. 4 (D.Del. Dec. 16, 2010). Plaintiff was injured on January 1, 2009. (D.I. 228, ex. 1 at 78; D.I. 238 at A284) At the time, he was housed in Building 17 at the VCC. (D.I. 228, ex. 3 at B404) The maximum security housing units at the VCC, including the Secured Housing Unit (“SHU”), consist of Buildings 17, 18, and 19. (Id. at ex. 3, ¶ 2)
Plaintiff was transported to the Kent General Hospital in Dover, Delaware and received treatment following complaints of back and right hand pain. (D.I. 225, A189, A192-201) X-rays taken were normal with the exception of a lumbar spine x-ray which indicated loss of normal lumbar lor-dosis possibly due to muscular strain. (Id.) Hospital records note possible muscle sprain, positive for tenderness to palpation, with no visual abnormality. (Id. at A196) Plaintiff was discharged from the hospital and returned to the prison infirmary. (Id. at A326) While in the infirmary, physician’s orders dated January 4, 2009, instruct that plaintiffs ace wrap should be removed b.i.d. (i.e., twice a day) and that he should be encouraged to stretch and exercise his fingers for two weeks. (Id. at A273)
Damron, who provided plaintiff with physical therapy, saw him on January 6, 2009, noted “some popping of hand when exercising,” and questioned whether a new x-ray was needed. (Id. at A324) Damron provided physical therapy the next day, January 7, 2009. Because a correctional officer was not available, she performed the physical therapy through the cell door flap. (D.I. 223, ex. C at ¶ 7) Damron states that the physical therapy was performed correctly and in an appropriate manner. ' (Id. at ¶ 7) Plaintiff testified that Damron “snatched my arm, I guess to try to do [the exercise], or maybe she was just yanking it to be vindictive. I don’t know. All I know is she yanked and my arm was hurt at the time.” (D.I. 228, ex. 1 at 81-82) Plaintiff testified that the incident with Damron caused pain, but no injury or damage. (Id. at 85-86) Damron states that she did not intend to hurt or cause harm to plaintiff while assisting him in the range of motion exercises. (D.I. 223, ex. C at ¶ 9)
Plaintiff submitted a grievance on January 8, 2009, complaining of lack of heat in the infirmary. (D.I. 238 at Bl) According to Pierce, around 2009 there were problems with the heating system for the infirmary, but there was never a time when there was no heat for any extended period of time. (D.I. 228, ex. 2, ¶ 8) When the air handlers were being re-engineered and construction was in progress, it was common practice to provide inmates in the infirmary with extra blankets and, when there were heating problems in the unit, an inmate in the infirmary would receive an extra blanket upon request. (Id.) There was no policy that prevented an inmate from receiving an extra blanket. (Id.)
Plaintiff was discharged from the infirmary and returned to his housing assignment in the SHU. On January 9, 2009, he submitted a sick call slip complaining that his back and hand were “still hurting excruciatingly. The pain medication dulls it slightly, but not enough. I can’t take this pain,” (Id. at A302) Plaintiff was seen by Nurse Bryant on January 12, 2009. (Id.) Plaintiff testified that he requested treat*346ment and medication for an infection in his elbow from Bryant, and she refused.5 (D.I. 228, ex. 1 at 89-90) According to Bryant, she examined plaintiff, saw no evidence of an infection, took his vital signs, and discussed his complaints. (D.I. D.I. 223, ex. D, ¶¶ 4-6; D.I. 225 at A302) The plan included an x-ray of the right elbow to rule out a fracture.6 (D.I. 25 at A272, A302)
Plaintiff testified that he was seen by a physician on January 16, 2009 after his arm “exploded” and a correctional officer called the doctor. (D.I. 228, ex. 1 at 166) The physician obtained a culture from the elbow and ordered antibiotics. (Id. at A272; A321) Test results indicated a staphylococcus infection. (Id. at A544) The same day, x-rays were taken of plaintiffs lumbar spine, right and left hip, pelvis, right elbow and right wrist. (D.I. 225 at A540-543) On January 19, 2009, a medical procedure was performed at the nurses station, the elbow was drained, cleansed and irrigated, and plaintiff was continued on antibiotics. (D.I. 225 at A321-322)
Plaintiff complained of back, shoulder, right arm, and elbow damage and pain in January, March, April, May, July, November and December 2009.7 (D.I. 238 at A181, A294-A302, A356, A372) Plaintiff was seen by medical on January 12, 2009, February 4, 2009, May 20, 2009, August 6, 2009, and December 15, 2009. (D.I. 238 at A294-A297, A300-A302) On February 4, 2009, Dr. Desrosiers submitted a consultation request for plaintiff to see a neurologist to rule out nerve damage, and on August 19, 2009, he submitted a consultation request for plaintiff to see a physical therapist for an opinion and treatment. (Id. at A185-86)
On November 4, 2009, plaintiff was transferred to the C-Building isolation unit in SHU, and he remained there until November 15, 2009. (D.I. 225 at A318; D.I. 228, ex. 3, ¶ 9) Plaintiff received a medical pre-segregation evaluation on November 5, 2009. (D.I. 225 at A318-19) Examination revealed right elbow edema with puss drainage. (Id.) A culture was obtained, and a physician contacted who prescribed an antibiotic. (Id.) Plaintiffs elbow was irrigated and topical antiseptics were applied followed by gauze to secure the wound, and plaintiff was checked again about an hour later. (Id. at A319) Plaintiff was seen by mental health personnel on November 9, 2009. At that time he complained of an elbow infection and that the nurses kept “blowing him off.” (Id. at A370) The mental health note references a phone call to a nurse and that day plaintiff was seen by the nursing staff who noted the condition of his elbow, provided treatment and took a culture of the wound. (Id. at A316, A370) The culture was negative for staphylococcus. (Id. at A539). Plaintiff was seen by nursing staff the next day, November 10, 2009. (Id. at A315) Physical therapy was scheduled for December 29, 2009.8 (D.I. 237 at B30)
*347Plaintiff testified that he was denied medical treatment while housed in isolation because nurses are given the final decision whether an inmate needs treatment by a specialist or physician. (D.I. 412, ex. 1 at 108) After his release from isolation, plaintiff submitted a grievance complaining that he was refused soap, washcloths, recreation, toothpaste and a toothbrush, and allowed only three ten-minute showers per week which was the only time he was allowed to use soap. (D.I. 237 at B39) He also complained that nurses and officers told him that he was not allowed medical treatment while in isolation but, once out of isolation, he could fill out a sick call slip. (Id.) The response to the grievance noted that certain items are not allowed in isolation due to security concerns, and recommended education of nursing staff with regard to an inmate receiving medical treatment while in isolation, noting that an inmate should not be denied treatment. (Id. at B40, B42)
For security reasons, inmates in isolation are strip searched three times per day, once during each eight-hour shift by either a lieutenant or supervisor. (D.I. 228, ex. 3 at ¶ 8; D.I. 240 at ex. A, Phelps Request for Admissions No. 8) According to Rispoli, the check of the inmate on each shift includes medical needs. (D.I. 228, ex. 3 at ¶ 8) According to Rispoli, there is no policy that prevents inmates in isolation from receiving medical treatment. (Id., ex. 3 at ¶ 7) Inmates in isolation can also submit sick call slips and request medical treatment. (Id.) Inmates in isolation are provided with medical treatment and, if there is a need that warrants treatment in the infirmary, the inmate is sent there. (Id.)
Inmates are provided soap and hygiene items during shower and recreation time and, upon request, inmates are provided with soap, towels, and toilet paper for use in the cell, with the toilets flushed by correctional officers. (D.I. 228, ex. 3 at ¶ 5; D.I. 240 at ex. A, Phelps Request for Admissions Nos. 2, 4) C-Building does not have an outdoor recreation area, but its inmates are provided with indoor recreation, three times a week for an hour. (Id. at ¶ 6) During that time, the inmate can shower and use the time for recreation. (Id.)
Plaintiffs right shoulder and right elbow were x-rayed on January 8, 2010, and the results were within normal limits. (D.I. 225, A534-36) Plaintiff complained of right arm, elbow, and shoulder pain in February and March 2010 and was seen after each complaint. (D.I. 238 at A295, A356) Consultation requests for physical therapy were approved in March and June 2010, with both requests ordering physical therapy two times per week for six weeks. The requests included teaching exercises on physical therapy days and a reevaluation of plaintiff by the provider in six weeks. (D.I. 238 at A174, 181)
On June 16, 2010, plaintiff underwent an MRI of the right shoulder.9 (D.I. 238 at A644) Impression included tendinosis/ten-dinopathy of the rotator cuff tendon complex; degenerative/stress related change involving the acromioclavicular joint articulation; mild subdeltoid bursal inflammation; and evidence of degenerative change with minimal fibrillation and blunting of the glenoid10 labrum in the posterosuperi- or quadrant. (Id.)
*348On July 1, 2010, CCS became the medical service provider for DOC institutions, serving as the general healthcare provider. See Williamson v. Correct Care Services LLC, 2010 WL 5260787 at n. 4. On July 25 and 29, 2010, plaintiff complained of shoulder pain, and he was seen by medical on August 1, 2010. (D.I. 238 at A700, A702) On August 16, 2010, plaintiff was seen by an orthopedic specialist and given a cortisone injection for pain. (D.I. 191, ex. B at A698) The specialist found that plaintiff had degenerative changes and disruption of the A/C joint and indicated that plaintiff would need future surgery for a distal clavicle repair. (D.I. 238 at DuShuttle One) Plaintiff submitted a sick call slip on September 2, 1010, complaining that his cortisone injection had not worked and asked if his surgery could be expedited. (D.I. 191, ex. B at A698) The September 2, 2010 note states, “notes refer to consult it appears not have been done.” (Id.) Plaintiff submitted sick call slips in October, November, and December 2010, and January and February 2011, complaining of arm and shoulder pain and asking why the surgery recommended had not been scheduled. ((D.I. 191, ex. B at A693, 691; D.I. 238 at A680, A685, A687) In October 2010, he was seen by a nurse and referred to a specialist for follow-up and consideration of surgery; he was seen by medical on November 24, 2010, said note reflecting an outside provider recommended surgery; and he was seen by medical personnel on December 29, 2010, January 1, 2011, and February 5 and 21, 2011. (D.I. 191, ex. B at A693, A717; D.I. 238 at A680, A683, A687, A691, A726) In January 2011, plaintiff was made aware that his pain medication had been renewed and, in February 2011, he was advised of the medical plan for an orthopedic consultation and that he would be referred to pain management until the consult was completed. (D.I. 238 at A683, A687)
Arthroscopic surgery was performed on March 9, 2011 by Dr. R.P. DuShuttle (“Dr. DuShuttle”) who performed a resection labrum and distal clavicle. (D.I. 191 at A709, A716; D.I. 200 at A638) Diagnosis was degenerative arthritis of the right AC joint. (D.I. 200 at A638) Plaintiff was seen post-operatively by Dr. DuShuttle on March 21, 2011 and April 13, 2011. (D.I. 238 at A627, A632) On March 21, 2011, Dr. DuShuttle wrote an order for physical therapy. (Id. at A630)
Plaintiff was housed in the infirmary from March 8 to March 23, 2011. He testified that there was a policy that the door would not be opened for him based upon his status as a SHU inmate. (D.I. 412, ex. 1 at 33-34) To receive medical treatment, given that he had recently had surgery on his right arm, plaintiff was required to place his left arm/hand through the food slot which is three feet from the ground. (Id. at 33-36) Plaintiff testified that a correctional officer told a nurse that because plaintiff was in SHU she was not to open the door to his cell, but to treat him through the flap. (Id. at 112) Plaintiff testified that there was never a time when a nurse requested that a correctional officer take him out of the cell to receive treatment. (Id. at 167) Plaintiff relayed one incident when a nurse indicated that she needed to go into plaintiffs cell in the infirmary and was told by a correctional officer, “absolutely not, you never open this door.” (Id. at 168)
Pierce states that there is no policy preventing medical staff from entering the cell of a maximum security inmate who is housed in the infirmary. (D.I. 228, ex. 2, ¶ 3) For security reasons, when the door of a maximum security inmate’s infirmary *349door is opened, three staff members must be present at the cell door. (Id.) If medical staff needs to enter a maximum security inmate’s infirmary room, the medical staff should ask the correctional officer, who then escorts the medical staff into the infirmary room with two other officers. (Id.) Depending on the situation, the inmate may be restrained prior to the medical staff person entering the room. (Id.)
Plaintiff testified that, following his injuries and surgery, he was not provided ice for swelling and pain while housed in the infirmary. (D.I. 412, ex. 1 at 113, 136) He was told that “nobody in SHU was allowed to have ice.” (Id.) Plaintiff did not know if that was a medical rule or a security rule. (Id. at 114) He testified that he asked everyone for ice, every nurse and every officer, but he could not recall their names. (Id. at 162) Medical records indicate that following the January 1, 2009 injury, plaintiff was given ice for his right hand, arm and elbow and a heat pack for his right lumbar region (D.I. 225 at A275, A326), and that he was given an ice pack (in conjunction with pain medication) following his June 1, 2001 injury (id. at A318). Medical records indicate that following the March 9, 2011 surgery, physician’s orders were written for plaintiff to apply ice fifteen minutes to an hour for the first two days. (D.I. 200 at A662) Medical records reflect that plaintiff was given ice packs on March 9 and March 10, 2011. (D.I. 191 at A715-716)
Pierce states that there is no policy that a maximum security inmate who is housed in the infirmary cannot have ice to treat swelling. (D.I. 228, ex. 2, at ¶ 4) If an inmate has a medical need for ice, the medical contractor has a duty to provide ice. (Id.) Maximum security inmates housed in SHU or in the infirmary are not allowed to obtain ice for non-medical use. (Id.)
There is no policy that maximum security inmates housed in the infirmary cannot have recreation. (Id. at ¶ 5) However, there is a policy that, inmates of different classifications cannot co-mingle and, because the infirmary contains a mixture of classified inmates, for security reasons, maximum security inmates in the infirmary are not sent to recreation. (Id.) If there is a medical need for recreation, based on a doctor’s order, a maximum security inmate in the infirmary can receive recreation or physical therapy as directed by the physician. (Id.) Maximum security inmates in the infirmary are allowed to shower and, according to Pierce, there is no policy that prevents them from showering. (Id. at ¶ 6) Maximum security housed in the infirmary are not prevented from using the phone but they have less access due to their privilege levels and, for security reasons, there is an unwritten practice that prevents an inmate in the infirmary from making telephone calls when being taken from the institution to an outside medical facility. (Id. at ¶ 7)
Following surgery, Dr. DuShuttle ordered pain medication to be administered to plaintiff twice daily for seven days. (D.I. 191, ex. B at A637) A second prescription for a different form of pain medication was written on March 21, 2011 to be given to plaintiff over the next 21 days. (Id. at A658) DOC medical records indicate that orders were written for pain medication on March 21, 22, and 23, 2011.11 *350(D.I. 238 at A659) Plaintiff was seen by medical following the surgery on an almost daily basis until March 23, 2011. (Id. at A710-16) When plaintiff ran out of “extra strength” pain medication, he submitted a sick call slip on March 30, 2011 complaining that it should not have happened and was advised that his order was good until April 15, 2011. (D.I. 191, ex. B at A678)
On April 8, 2011, plaintiff wrote to Dr. Desrosiers advising that the orthopedic specialist “anticipated the pain will increase steadily” as plaintiff regained motion in his shoulder and it began to heal over the next three to six months. According to plaintiff, his surgeon ordered pain medication to be administered twice daily during that time period. (Id. at A676) Plaintiff requested that his pain medication be continued until he could see the orthopedic specialist. (Id.) Plaintiff submitted a second sick call on April 16, 2011, stating that his surgeon wrote an order that must not have been delivered to Dr. Desrosiers, that the order indicated that his pain was expected to worsen, and requested the order be given to Dr. Desro-siers. (Id. at A674) Dr. Desrosiers spoke to Dr. DuShuttle on April 25, 2011 regarding plaintiffs statement regarding his level of pain and the continued need for the pain medication. Dr. Desrosiers stated that Dr. DuShuttle “never said [plaintiffs] pain was going to get worse,” and indicated that the pain medication should have been only necessary for approximately 21 days post-surgery. (Id. at A674)
On April 18, 2011, CCS requested an outpatient referral for assessment and treatment as .the “ortho requests to start PT ASAP.” (D.I. 238 at A623) CCS progress notes reveal that plaintiff was seen on March 29, April 28, May 10, Mary 24 and June 9, 2011 and that plaintiff was performing range of motion and strengthening exercises. (D.I. 128, at A83) Plaintiff testified that he did not regularly receive physical therapy as ordered by his physicians. (D.I. 412, ex. 1 at 40-41, 106) He was told that inmates housed in SHU did not receive physical therapy as often as inmates on the compound because of scheduling issues and the number of correctional officers, but he did not know who scheduled the inmates for the required physical therapy or who had the final decision making to schedule therapy sessions. (Id. at 41) He testified that the physician also ordered exercises that plaintiff could perform on his own in his cell and a physical therapist showed plaintiff how to perform range of motion activities. (D.I. 412, ex. 1 at 84, 171) At the time of his deposition, plaintiff testified that he had range of motion in his shoulder because he “took it upon [himself] to rehabilitate ... and [he] had to work hard to get [his] strength.” (D.I. 412, ex. 1 at 45)
Plaintiff testified that neither of the medical care providers provided medical care until after he submitted grievances seeking treatment.12 (Id. at 118) Plaintiff testified that the medical service providers have a practice of delaying medical care to the furthest possible time. (Id. at 125) He testified that the delay in his surgery from *351the time he was injured in 2009, until the 2011 surgery, is attributable to CMS and CCS. (Id. at 119-120)
III. STANDARD OF REVIEW
“The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the burden of demonstrating the absence of a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). “Facts that could alter the outcome are ‘material,’ and disputes are ‘genuine’ if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct.” Horowitz v. Federal Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (citations omitted). In determining whether a genuine issue of material fact exists, “the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence,” Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (citing Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55, 110 S.Ct. 1331, 108 L.Ed.2d 504 (1990)).
If the moving party has demonstrated an absence of material fact, the nonmoving party then “must come forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Matsushita, 475 U.S. at 587, 106 S.Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). The court will “view the underlying facts and all reasonable inferences therefrom in the fight most favorable to the party opposing the motion.” Pennsylvania Coal Ass’n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995). The mere existence of some evidence in support of the nonmoving party, however, will not be sufficient for denial of a motion for summary judgment; there must be enough evidence to enable a jury reasonably to find for the nonmoving party on that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
Defendants CMS, Bryant, and Damron (collectively “CMS defendants”) move for summary judgment on the grounds that plaintiff failed to: (1) develop any evidence to establish a constitutional violation of his rights as a result of the medical care he received; and (2) develop any evidence to establish the deprivation of a liberty interest sufficient to warrant due process protection.13 Defendant CCS moves for summary judgment on the grounds that plaintiff: (1) failed to produce evidence to support the necessary elements of an Eighth Amendment claim; (2) produce the necessary medical expert opinion to establish his claims of negligent medical care; and (3) cannot show that he was deprived of a liberty interest covered by the Fourteenth Amendment. Defendants Danberg, Phelps, Pierce, Costello, Rispoli, Klein and Doe (collectively State defendants”) move for summary judgment on the grounds that: (1) the claims against them in their official capacities are barred by the Eleventh Amendment; and *352(2) they are entitled to qualified immunity because plaintiff has failed to demonstrate their personal involvement in the alleged deprivation of his rights. Plaintiff opposes the motions.
IV. DISCUSSION
A. Eleventh Amendment
Plaintiff names State defendants in their official capacities. While not clear, it appears- that plaintiff argues the issue of Eleventh Amendment immunity should have been resolved early on and, because it was not, immunity is waived.
The Eleventh Amendment of the United States Constitution protects an un-consenting State or state agency from a suit brought in federal court by one of its own citizens, regardless of the relief sought. See Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996); Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984); Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). “[A] suit against a state official in his or her official capacity is not a suit against the official but rather is a suit against the official’s office. As such, it is no different from a suit against the State itself.” Will v. Michigan Dep’t of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989) (internal citations omitted); Ali v. Howard, 353 Fed.Appx. 667, 672 (3d Cir.2009) (unpublished). Accordingly, § 1983 claims for monetary damages against a State, state agency, or a state official in his official capacity are barred by the Eleventh Amendment. See id.
However, the Eleventh Amendment permits suits for prospective injunctive relief against state officials acting in violation of federal law. See Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). “This standard allows courts to order prospective relief, as well as measures ancillary to appropriate prospective relief.” Frew v. Hawkins, 540 U.S. 431, 437, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004) (internal citations omitted).
Plaintiffs claims for injunctive relief are moot given that he is no longer housed in the VCC. See Abdul-Akbar v. Watson, 4 F.3d 195, 197 (3d Cir.1993). In addition, as will be discussed, the record does not support a finding that State defendants acted in violation of federal law to warrant injunctive relief. Finally, the State of Delaware has neither consented to plaintiffs suit nor waived its immunity. Therefore, the court will grant State defendants’ motion for summary judgment as to the claims raised against them in their official capacities.
B. Eighth Amendment
1. Medical needs
All defendants move for summary judgment on the grounds that plaintiff has not established Eighth Amendment violations. Plaintiff argues that summary judgment is not proper because CMS has a history of providing inadequate medical care and it delayed and denied him required medical care.14 With regard to Bryant, plaintiff *353argues she did not examine his elbow, did not provide medical treatment, and did not provide him access to a physician. He further argues that summary judgment is not proper because CCS is responsible for failing to follow his orthopedic surgeon’s orders (i.e., needed physical therapy and required medications) and because he was required to receive treatment through a hole close to the floor of a cell door. Finally, plaintiff argues that summary judgment is not proper because State defendants enacted deficient policies which resulted in constitutional violations.
The Eighth Amendment proscription against cruel and unusual punishment requires that prison officials provide inmates with adequate medical care. Estelle v. Gamble, 429 U.S. 97, 103-105, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976). In order to set forth a cognizable claim, an inmate must allege (i) a serious medical need and (Ü) acts or omissions by prison officials that indicate deliberate indifference to that need. Estelle v. Gamble, 429 U.S. at 104, 97 S.Ct. 285. Serious medical needs are those that have been diagnosed by a physician as requiring treatment or are so obvious that a lay person would recognize the necessity for medical attention, and those conditions which, if untreated, would result in a lifelong handicap or permanent loss. See Monmouth Cnty. Corr. Inst. Inmates v. Lanzaro, 834 F.2d 326, 347 (3d Cir.1987). Deliberate indifference requires more than mere negligence or lack of due care. See Farmer v. Brennan, 511 U.S. 825, 835, 114 S.Ct. 1970, 128 L.Ed.2d 811 (1994). To demonstrate deliberate indifference, the plaintiff must demonstrate that the defendant was “subjectively aware of the risk” of harm to the plaintiff. See Farmer, 511 U.S. at 828, 114 S.Ct. 1970. The plaintiff must allege acts or omissions that are sufficiently harmful to offend “evolving standards of decency.” Estelle v. Gamble, 429 U.S. at 106, 97 S.Ct. 285.
“Mere medical malpractice cannot give rise to a violation of the Eighth Amendment,” White v. Napoleon, 897 F.2d 103, 108 (3d Cir.1990). In addition, an inmate’s claims against members of a prison medical department are not viable under § 1983 where the inmate receives continuing care but believes that more should be done by way of diagnosis and treatment and maintains that options available to medical personnel were not pursued on the inmate’s behalf. Id. at 107.
The record reflects that plaintiff has a serious medical need, having sustained injuries in January and June 2009 and ultimately undergoing surgery in March 2011. The record further demonstrates that plaintiff was provided with ongoing care. Plaintiff was injured on January 1, 2009 and, on that day, transported to the hospital for treatment. Upon his return from the hospital, he remained in the prison infirmary for approximately one week where he received care and treatment. He was seen by medical personnel on a fairly regular basis prior to the reinjury in June 2009 and throughout 2009, 2010 and 2011. The record is replete with documentation showing that plaintiff was provided with medical care at the prison, referrals to outside specialists, treatment by outside specialists, diagnostic testing, and surgery.
Surgery was ultimately performed on plaintiffs shoulder in 2011, it appears, after attempts of more conservative treatment, such as physical therapy and cortisone injections, failed. Recommendations *354that plaintiff undergo physical therapy were approved, but there were delays in receiving the therapy. Nonetheless, the record reflects that plaintiff received some physical therapy and that he was given a regimen of exercises to perform. Indeed, plaintiff testified that he had range of motion in his shoulder because he had worked hard to regain his strength. At most, CMS defendants and CCS were negligent in plaintiffs delay in receiving physical therapy. Negligence, however, does not rise to the level of a constitutional violation. Plaintiff also complains of the frequency and amounts of pain medication provided. The record indicates that plaintiff received pain medication, but not the dosages he mistakenly believed had been prescribed him. Finally, plaintiff complains that he was required to receive medical treatment through a slot in the cell door. While this may have not been the most professional manner in which to provide medical treatment, plaintiff did in fact receive treatment, regardless of how unorthodox the method may have been. Hence, it cannot be said defendants were deliberately indifferent to plaintiffs medical needs.
Plaintiff also complains of treatment he received at the hands of Bryant. The medical records indicate that Bryant examined plaintiff and found no sign of infection. Moreover, she recommended that plaintiff receive another x-ray to rule out a fracture. Although an infection was discovered a few days later, Bryant’s failure to discover the infection, at most, lies in negligence, not deliberate indifference.
The evidence of record does not indicate that any State defendants had involvement in plaintiffs medical care. See Baraka v. McGreevey, 481 F.3d 187, 210 (3d Cir.2007). A defendant in a civil rights action must have personal involvement in the alleged wrongs to be liable, and cannot be held responsible for a constitutional violation which he or she neither participated in nor approved.” While plaintiff points to a number of DOC policies, none of the identified policies are responsible for plaintiffs perceived constitutional violations.
Further, it is well-established that non-medical prison staff may not be “considered deliberately indifferent simply because they failed to respond directly to the medical complaints of a .prisoner who was already being treated by the prison doctor.” Durmer v. O’Carroll, 991 F.2d 64, 69 (3d Cir.1993). The rationale for this rule has been aptly explained by the United States Court of Appeals for the Third Circuit in the following terms:
If a prisoner is under the care of medical experts ..., a non-medical prison official will generally be justified in believing that the prisoner is in capable hands. This follows naturally from the division of labor within a prison. Inmate health and safety is promoted by dividing responsibility for various aspects of inmate life among guards, administrators, physicians, and so on. Holding a non-medical prison official liable in a case where a prisoner was under a physician’s care would strain this division of labor. Moreover, under such a regime, non-medical officials could even have a perverse incentive not to delegate treatment responsibility to the very physicians most likely to be able to help prisoners, for fear of vicarious liability. Accordingly, we conclude that, absent a reason to believe (or actual knowledge) that prison doctors or their assistants are mistreating (or not treating) a prisoner, a non-medical prison official ... will not be chargeable with the Eighth Amendment scienter requirement of deliberate indifference.
*355Spruill v. Gillis, 372 F.3d at 236. Courts have repeatedly held that, absent some reason to believe that prison medical staff are mistreating prisoners, non-medical corrections staff who refer inmate medical complaints to physicians may not be held personally liable for medically-based Eighth Amendment claims. See Spruill, 372 F.3d at 218; Durmer, 991 F.2d at 64.
Although plaintiff disagrees with the frequency and type of care and treatment he received, “mere disagreement as to the proper medical treatment” is insufficient to state a constitutional violation. See Spruill v. Gillis, 372 F.3d 218, 235 (3d Cir.2004) (citations omitted). In light of the extensive medical care provided plaintiff, no reasonable jury could find that defendants were deliberately indifferent to plaintiffs medical needs.
The record does not support a finding that defendants were deliberately indifferent to plaintiffs medical needs or that they violated plaintiffs constitutional rights. Instead, the record indicates that steps were taken to see that plaintiff received constitutionally adequate medical care. Therefore, the court will grant defendants’ motions for summary judgment on the medical needs issue.
2. CMS and CCS policies
With regard to CMS and CCS, in order to establish that either one of them is directly hable for any alleged constitutional violations, plaintiff “must provide evidence that there was a relevant [ ] policy or custom, and that the policy caused the constitutional violation[s] [plaintiff] allege[s].” Natale v. Camden Cnty. Corr. Facility, 318 F.3d 575, 584 (3d Cir.2003) (because respondeat superior or vicarious liability cannot be a basis for liability under 42 U.S.C. § 1983, a corporation under contract with the state cannot be held liable for the acts of its employees and agents under those theories).
Because the court has concluded that there was no violation of plaintiffs constitutional rights under the Eighth Amendment, neither CMS nor CCS can be liable based on the theory that they established or maintained an unconstitutional policy or custom responsible for violating plaintiffs rights. See Goodrich v. Clinton Cnty. Prison, 214 Fed.Appx. 105, 113 (3d Cir.2007) (unpublished) (policy makers not liable in prison medical staffs alleged deliberate indifference to prisoner’s serious medical needs where, given that there was no underlying violation of prisoner’s rights, policy makers did not establish or maintain an unconstitutional policy or custom responsible for violating prisoner’s rights). In light of the foregoing, the court will grant the motions for summary judgment of CMS and CCS as to plaintiffs medical needs claims.
C. Due Process
Plaintiff alleges his right to due process was violated when, because of his security classification, he was subjected to conditions significantly worse than other inmates under similar circumstances. More particularly, plaintiff alleges that he was refused treatment while housed in isolation, and medical personnel refused to enter his cell to provide treatment when he was housed in the infirmary. CMS defendants move for summary judgment on the grounds that: (1) security mandates dictate housing assignments and an inmate’s access to items; and (2) plaintiff has failed to point to any DOC policy that places a burden upon the medical provider to treat inmates differently based upon their housing status. CCS moves for summary judgment on the grounds that: (1) any claims plaintiff raises under due process are based upon DOC policies for the security of the institution, not CCS policies; and (2) because plaintiffs due process claims are *356also covered by his Eighth Amendment claims, the due process claims are duplica-tive and should be dismissed. State defendants move for summary judgment on the grounds that they had no personal involvement in the alleged constitutional violations and they cannot be held liable under a theory of respondeat superior.
A constitutionally-protected interest may arise either from the Due Process Clause itself, or from a statute, rule, or regulation. Hewitt v. Helms, 459 U.S. 460, 466, 103 S.Ct. 864, 74 L.Ed.2d 675 (1983). In Sandin v. Conner, 515 U.S. 472, 115 S.Ct. 2293, 132 L.Ed.2d 418 (1995), the Supreme Court recognized that, under certain circumstances, states may create liberty interests protected by the Fourteenth Amendment due process clause. In the prison context, “these interests will be generally limited to freedom from restraint which ... while not exceeding the sentence in such an unexpected manner as to give rise to protection by the Due Process Clause of its own force, nonetheless imposes atypical and significant hardship on the inmate in relation to the ordinary incidents of prison life.” Id. at 484, 115 S.Ct. 2293. In deciding whether a protected liberty interest exists, a federal court must consider the duration of the disciplinary ¡ confinement -and the conditions of that confinement in relation to other prison conditions. See Mitchell v. Horn, 318 F.3d 523, 532 (3d Cir.2003) (citing Shoats v. Horn, 213 F.3d 140, 144 (3d Cir.2000)). Absent a protected interest, substantive due process is not implicated. Finally, if a constitutional claim is covered by a specific constitutional provision, such as the Eighth Amendment, the claim must be analyzed under the standard appropriate to that specific provision, not under the rubric of substantive due process. Cooleen v. Lamanna, 248 Fed.Appx. 357, 361 (3d Cir.2007) (unpublished) (quoting County of Sacramento v. Lewis, 523 U.S. 833, 843, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998); see also Graham v. Poole, 476 F.Supp.2d 257 (W.D.N.Y.2007) (holding that when a prisoner’s “deliberate indifference claim is covered by the Eighth Amendment, the substantive due process claims are duplicative” and thus “the substantive due process claims [should be] dismissed”) (quotations and citations omitted).
There is no evidence of record that plaintiff was treated differently than other inmates with the same security classification who had medical needs whether housed in isolation or the infirmary. Plaintiffs confinement in isolation and the infirmary did not exceed similar, but totally discretionary confinement in either duration or degree of restriction. Sandin, 515 U.S. at 486, 115 S.Ct. 2293. In addition, plaintiffs periods of confinement in isolation and the infirmary were for very short period of time. See Griffin v. Vaughn, 112 F.3d 703 (3d Cir.1997) (administrative custody placement for a period of fifteen months was not an atypical and significant hardship). Moreover, DOC policies were implemented for the safety and security of the prison. Even if medical personnel somehow misconstrued the policies, it cannot be said that they violated plaintiffs constitutional rights.
Finally, plaintiffs Eighth Amendment claims, including the medical needs claims and conditions of confinement claims, are duplicative of the Fourteenth Amendment claims. As discussed above, plaintiff received adequate medical care. See e.g., Cooleen v. Lamanna, 248 Fed.Appx. 357 (3d Cir.2007) (unpublished) (finding that an inmate cannot show the violation of a constitutionally protected liberty interest when he received medical treatment). Even were the claims not du-plicative, the DOC policies that plaintiff *357finds objectionable are based upon his SHU housing status, are the same for inmates with his same security classification, and implemented for the safety and the security of the institution. Prison officials require broad discretionary authority as the “operation of a correctional institution is at best an extraordinarily difficult undertaking.” Wolff v. McDonnell, 418 U.S. 539, 566, 94 S.Ct. 2963, 41 L.Ed.2d 935 (1974). Hence, prison administrators are accorded wide-ranging deference in the adoption and execution of policies and practices that are needed to preserve internal order and to maintain institutional security. Bell v. Wolfish, 441 U.S. 520, 527, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979).
For the above reasons, the court will grant defendants’ motions for summary judgment on the due process issue.
D. Conditions of Confinement
State defendants move for summary judgment on the grounds that they had no personal involvement in the alleged constitutional violations and they cannot be held liable under a theory of respondeat superi- or. Plaintiff argues that State defendants are responsible for the unconstitutional conditions of confinement he was subjected to in the infirmary and in SHU.15
A condition of confinement violates the Eighth Amendment only if it is so reprehensible as to be deemed inhumane under contemporary standards or such that it deprives an inmate of minimal civilized measure of the necessities of life. See Hudson v. McMHIian, 503 U.S. 1, 8, 112 S.Ct. 995, 117 L.Ed.2d 156 (1992); Wilson v. Seiter, 501 U.S. 294, 298, 111 S.Ct. 2321, 115 L.Ed.2d 271 (1991). When an Eighth Amendment claim is brought against a prison official, it must meet two requirements: (1) the deprivation alleged must be, objectively, sufficiently serious; and (2) the prison official must have been deliberately indifferent to the inmate’s health or safety. Farmer v. Brennan, 511 U.S. at 834, 114 S.Ct. 1970. Deliberate indifference is a subjective standard in that the prison official must actually have known or been aware of the excessive risk to inmate safety. Beers-Cawpitol v. Whetzel, 256 F.3d 120, 125 (3d Cir.2001).
As to the isolation unit, plaintiff alleges unlawful conditions of confinement when he was: (1) denied exercise; (2) denied medical treatment; (3) subjected to invasive strip searches during a twelve day period; . (4) denied hygienic items and clothing other than boxer shorts and a t-shirt; (5) was cuffed behind his back at sick call appointments; and (6) required to buy pain medication from the infirmary. With regard to the conditions of confinement in the infirmary, plaintiff alleges that he was subjected to cruel and unusual punishment when he was: (1) forced to receive medical treatment by sticking his arm out of the food slot; (2) denied extra blankets or clothing while in freezing conditions; (3) denied ice following his injuries and post-surgery; (4) denied a shower; (5) could not make a phone call; and (6) denied recreation.
Plaintiff bases his claims on alleged VCC policies that State defendants instituted or maintained and argues that, by reason of DOC policies, liability may attach to State defendants. Plaintiff argues his claims are directly linked to State defendants given DOC’s policies that: (1) the DOC’s function is to ensure proper performance by the medical defender; (2) institutional authority shall work in conjunction with the medical director in cases where security and control of the offender are issues; (3) all policies are available for *358viewing on the DOC website; (4) pres-creening is specified for any isolation period; (5) the medical director has the overall responsibility for the quality of care in the infirmary; and (6) procedures should be developed that assure offenders remain free from capricious searches. (See D.I. 240, ex. B at 408 V.I., 410 V.2., 420 V.3.; 511-514; 528-531; 561, 566)
The record does not reflect that there are policies that prevent inmates in isolation from receiving medical treatment. Notably, the record reflects that plaintiff received medical care while in isolation. In addition, relevant policies provide that inmates are assessed by medical before being placed into isolation and, every shift, inmates in isolation are checked by supervisors. In addition, inmates may submit sick call slips when they are in isolation. Inmates in isolation are allowed out-of-cell time, three times a week for an hour, to recreate and/or shower. For security reasons, inmates receive hygienic items upon request. Also, for security reasons, inmates in isolation are searched once on every shift.
With respect to the infirmary claims, the VCC policies do not prevent: (1) medical staff from entering a SHU inmate’s infirmary cell when a correctional officer is present; (2) SHU inmates from using ice to treat swelling when there is a medical need;16 (3) SHU inmates from recreation with inmates who have the same security classification; (4) SHU inmates from showering; (5) maximum security housed inmates in the infirmary from making telephone calls with the exception that phone calls are not allowed when an inmate leaves for outside medical treatment; and (6) any inmate from receiving an extra blanket when warranted due to problems with the heat.
Although plaintiffs housing status may have caused harsher conditions in the infirmary and the conditions in isolation are harsher than other housing assignments, they do not constitute a denial of “the minimal civilized measures of life’s necessities.” See, e.g., Williams v. Delo, 49 F.3d 442, 444-47 (8th Cir.1995) (holding no Eighth Amendment violation where prisoner was placed in a strip cell without clothes, the water in the cell was turned off and the mattress removed, and prisoner’s bedding, clothing, legal mail, and hygienic supplies were withheld). Indeed, there is no evidence of record that plaintiff was denied basic human needs such as clothing, food, shelter, sanitation, medical care, and personal safety. Rather, his complaint’s revolve around temporary restrictions based upon his security classification. Finally, there is no evidence of personal involvement by any named State defendant as to the conditions of confinement claims, or that prison officials knew of, and disregarded, an excessive risk to plaintiffs health or safety. See Beers-Capitol, 256 F.3d at 125.
Plaintiff may have found his temporary conditions of confinement uncomfortable, but they were no different than those afforded to other inmates temporarily housed in the infirmary or in isolation with the same security classification. See e.g., Griffin v. Vaughn, 112 F.3d 703 (3d Cir.1997). Plaintiff failed to raise a genuine issue of material as to whether his conditions of confinement were cruel and unusual punishment. Therefore, the court will grant State defendants’ motion for summary judgment as to this claim.
*359E. Assault and Battery
Damron moves for summary judgment on the issue of assault and battery. Plaintiff opposes the motion on the grounds that there remain issues of fact.
The tort of assault and battery is defined in Delaware as “the intentional, unpermitted contact upon the person of another which is harmful or offensive.” Brzoska v. Olson, 668 A.2d 1355, 1360 (Del.1995) (citations omitted). Lack of consent is an essential element of assault and battery. Brzoska, 668 A.2d at 1360. The intent necessary for battery is the intent to make contact with the person, not the intent to cause harm. Id. (citations omitted). Also, the contact need not be harmful; it is sufficient if the contact offends the person’s integrity. Id. (citations omitted), “In order for a contact to be offensive to a reasonable sense of personal dignity, it must be one which would offend the ordinary person and as such one not unduly sensitive as to his personal dignity. It must, therefore, be a contact which is unwarranted by the social usages prevalent at the time and place at which it is inflicted.” (Id.) The propriety of the contact is therefore assessed by an objective “reasonableness” standard. See In re Taylor v. Barwick, 1997 WL 527970, at *3 (Del.Super.Ct. Jan. 10, 1997).
There is no evidence that plaintiff did not consent to the contact by Damron. Rather, the evidence is that he sought physical therapy. In addition, the acts complained of occurred in a medical setting, at the direction of a physician, and while plaintiff was housed in the infirmary. Damron states that she did not intend to cause plaintiff harm, while plaintiff testified that she yanked his arm and it hurt. Plaintiff presented no evidence that physical therapy exercises were performed incorrectly.
Viewing the evidence as a while, the acts taken by Damron were objectively reasonable. Therefore, the court will grant the motion for summary judgment on the issue of assault and battery.
V. CONCLUSION
For the above reasons, the court will grant defendants’ motions for summary judgment. (D.I.222, 224, 226) In addition, the court will dismiss the Doe defendants for plaintiffs failure to identify them and/or to serve them.
An appropriate order will issue.
ORDER
At Wilmington this 25th day of February, 2014, for the reasons set forth in the memorandum opinion issued this date;
IT IS HEREBY ORDERED that:
1. Captain John Doe, Correctional Medical Services John Doe medical director and Correct Care Services John Doe medical director are dismissed as defendants.
2. Defendants’ motions for summary judgment are granted. (D.I.222, 224, 226)
3. The Clerk of Court is directed to enter judgment in favor of defendants and against plaintiff and to close the case.
. When bringing a § 1983 claim, a plaintiff must allege that some person has deprived him of a federal right, and that the person who caused the deprivation acted under color of state law. West v. Atkins, 487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40 (1988).
.When the court screened the original complaint it dismissed: (1) "IV. Parties,” paragraphs twelve through sixteen and twenty; (2) "VI. Statement of Facts,” paragraphs twenty-seven through thirty-two and thirty-five; (3) “VII Causes of Action/Claims for Relief,” paragraphs sixty-three through sixty-five, sixty-eight, sixty-nine, and seventy-four; and (4) defendants Lieutenant John Doe, Sergeant John Doe, Brian Kuhner, Ms. West, Maintenance Supervisor John Doe, Dr. Baeder, all claims related to tier flooding, and all medical negligence claims. (D.I. 8, 121) Plaintiff was allowed to proceed against several defendants including Captain John Doe who has never been identified or served. He will be dismissed as a defendant. Plaintiff's amended complaint added defendants Correct Care Services, LLC, Mental Health Management ("MHM”), Allen Harris ("Harris”), John Doe Medical Director for Correctional Medical Services, Inc., and John Doe Medical Director for Correct Care Services, LLC. (D.I.66) MHM and Harris have since been dismissed. (See D.I. 133) During his deposition, plaintiff indicted that he "dropped” his claim against the Doe Medical Director for Correct Care Services. (D.I. 412, ex. 1 at 69) To date, neither Doe medical director has been identified or served. They will be dismissed as' defendants.
. CMS is now known as Corizon, Inc.
. Pierce is the current warden at the VCC.
. Plaintiff submitted a grievance on January 17, 2009 complaining that Betty Burris failed to notify the physician of his pain and swelling and asked that she be trained in sensitive ty. (D.I. 237 at B17) It is not clear if Betty Burris and Betty Bryant are one and the same.
. Dr. Desrosiers later ordered the x-ray.
. On June 1, 2009, plaintiff was involved in a scuffle, fell on his right arm and hit his elbow. (D.I. 238 at A318, A320)
. Physical therapy was scheduled after plaintiff submitted a grievance complaining that he had yet to receive physical therapy. An investigation revealed that an order for physical therapy was written in August 2009 but there were no physical therapy consultation and/or follow-up notes in the medical record. (D.I. 237 at B330
. Plaintiff testified that he had suggested he be given an MRI based upon a recommendation by a physical therapist and radiologist, but one was not performed even though it was needed. (Id. at 126) According to plaintiff, the results of the MRI indicated surgery. (Id. at 127)
. Relating to the articular depression of the scapula entering into the formation of the *348shoulder joint. The American Heritage Sted-man's Medical Dictionary 332 (2d ed.2004).
. Plaintiff was told by unnamed inmates that the medical director slashes inmates' orders for medication in half. (D.I. 412, ex. 1 at 46-47) Plaintiff testified that Dr. DuShuttle also' told him that medical cut his orders every time. (Id. at 48) Plaintiff testified that nurses told him that the medical director has the option of changing prescriptions. (Id. at 51) Plaintiff believes that CMS had such a policy and that CCS maintained the policies of its *350predecessor, has no documented proof of this, but testified there is a practice or custom of allowing medication to run out to save money. (Id. at 54, 57, 67-68, 105)
. During the time that CMS was the medical health care provider, plaintiff submitted grievances complaining of needed medical care, pain medication, physical therapy on January 9, 10, 17, 2009, November 28, 2009, December 13, 2009, April 26, 2010, and May 20, 2010. (D.I. 237 at B3, B4, B6, B14, B21, B30, B36, B44, B50, B53) Plaintiff submitted grievances with regard to CCS medical care and/or needed medication on October 15, 2010, March 24, 2011, and April 16, 2011 (D.I. 237 at B64, B77, B83, B85)
. The CMS defendants' motion for summary judgment filed contains the affidavit of Dr. Dale Rodgers ("Dr. Rodgers”). (D.I. 223, ex. E) The affidavit is not dated, nor is it signed by a notary public. Therefore, the court does not consider Dr. Rodgers' affidavit.
. Plaintiff relied upon an investigation that the Civil Rights Division of the United States Department of Justice ("USDOJ”) conducted of five Delaware prison facilities pursuant to the Civil Rights of Institutionalized Persons Act, which authorizes the federal government to identify and root out systemic abuses. (D.I.237, ex. 11) The investigation found substantial civil rights violations at four of the five facilities; Delores J. Baylor Women's Correctional Institution, Howard R. Young Correctional Institution, Delaware Correctional Center (now known as the VCC), and Sussex Correctional Institution. The investigation resulted in the entry of a memorandum of agreement on December 29, 2006, between *353the USDOJ and the State of Delaware regarding the four institutions. Paragraph I.F. of the agreement provides that it may not be used as evidence of liability in any other legal proceeding. (Id. at ¶ 1.F.)
. A conditions of confinement claim is not raised against the medical defendants.
. Contemporaneous medical records indicate that plaintiff was provided ice packs following his January 1, 2009 injury, his June 1, 2009 injury, and for two days following his March 9, 2011 surgery. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218989/ | KNIGHT, District Judge.
Execution was issued on a judgment against the above-named bankrupt on February 20, 1931. During each period of sixty days thereafter until July 31,1933, plaintiff’s attorneys notified the officer holding the execution that said execution was renewed. While the judgment creditor asserts that a levy on the execution was made when it was first issued, the officer holding the execution asserts the contrary. Proof of other facts confirms the statement of the officer. Prom time to time substantial payments were made on the execution to the officer. Adjudication herein was made within four months from the time of the levy. The judgment creditor claims that the lien under the execution attached from the date when it was first issued.
Section 679 of the Civil Practice Act of New York provides that goods are bound by the execution “from the time of the delivery thereof to the proper officer to be executed.” Assuming the execution when originally issued was intended “to be executed,” the same effect is not to be given to reissuanees of this execution. The renewals were not issued to be then executed' They were issued with the intent to permit the officer to withhold making a levy pending payments. Upon this state of facts the judgment creditor obtained no lien until an actual seizure of property was made. In re Avlon Syrup Corp. (D. C.) 25 F.(2d) 343; Hathaway v. Howell, 54 N. Y. 97; Smith v. Erwin, 77 N. Y. 466; Excelsior Needle Co. v. Globe Cycle Wks., 48 App. Div. 304, 62 N. Y. S. 538.
There is no proof showing that the property seized was the property of the judgment debtor when the execution was originally issued or at any time until the actual levy was made. A lien could not attach to a thing not in being. No presumption arises that the property was the same property. A levy made in 1933 on an execution renewed from 1931 cannot have the effect of creating a lien as of the latter date, for it does not appear that the property seized was possessed by the judgment debtor in 1931. Even were we to say that the execution was issued and renewed “to be executed,” the actual lien on the property seized was procured 'within four months preceding the adjudication, and hence was a preference.
Por the reasons assigned, the restraining order will be granted. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218991/ | REEVES, District Judge.
On motion of plaintiff to strike out parts of defendant’s amended answer. The petition in this ease is upon a contract.
Plaintiff alleged that on July 12,1928, the defendant, as the owner of 41,244 shares of the common stock of the Manhattan Oil Company, a corporation, employed the plaintiff and C. F. Alexander to effect an exchange of said shares for a part of the capital stock of the Independent Oil & Gas Company, a corporation.
The compensation for said services was to be 10 cents a share. It is alleged Ibat such exchange was consummated and that plaintiff and the said Alexander became entitled to the sum of $4,124.40 from defendant. Alexander assigned his interests to plaintiff. Therefore plaintiff asked judgment in his own behalf for the full amount of the compensation agreed upon.
The defendant filed a general denial to plaintiff’s petition. Upon the issues thus made up, the cause was docketed and called for trial. While awaiting trial, defendant filed an amended answer wherein he undertook to set up a cause of action in equity against plaintiff and the said C. F. Alexander. He asked that Alexander be made a party. It is this portion of the amended answer which plaintiff now seeks to have stricken out.
1. Section 820, R. S. Mo. 1929 (Mo. St. Ann. § 820), permits litigants to bring in new parties “when a complete determination of the controversy cannot be had without” them. This can be done by amendment of the petition or by supplemental petition and a new summons. This has been considered to mean that such an amendment can only be made when it does not introduce a new and distinct cause of action. In the instant case defendant’s amendment proposes to introduce a new and distinct cause of action.
2. Under the common law, new plaintiffs or new defendants could not be brought into an action by way of amendment to the pleadings. Such provision must be found in the statute. Since defendant seeks to raise an equitable issue or defense, he must come within the provisions of section 398, title 28 U. S. Code (28 USCA § 398).
This section specifically permits the interposition of equitable defenses “by answer, plea, or replication without the necessity of *655filing a bill on the equity side of the court.” However, this means only “equitable relief respecting the subject matter of the suit.” No provision is made therein for bringing in new parties. Breitung v. Packard (D. C.) 260 F. 895.
In the instant case the defendant asked for equitable relief upon other and different subject-matter.
3. Moreover, allowing such amendments, if permissible at all, is within the sound discretion of the court. The defendant in this case, both because of the delay in filing such an answer and because of the matter contained therein, does not invoke a discretion in his favor. The motion, therefore, of the plaintiff to strike out portions of defendant’s amended answer will be sustained. _ It is so ordered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218992/ | GALSTON, District Judge.
Rule 28 of the General Rules of this court provides:
“Cases which have been pending in this Court for more than one year without any proceedings having been taken therein during such year may be dismissed as of course, for want of prosecution, by the Court on its own motion, at a general call of the calendar. Such eases may also be dismissed for want of prosecution at any time on motion by any party upon notice to the other parties.”
It was designed to meet, among other instances of lack of prosecution, just such an example as is presented by the moving papers. No proceedings have been taken in this case since 1924. The casual correspondence and. conferences, telephonic or otherwisé, which passed between proctors for the respective parties, do not relieve the libelant from the burden of the rule; and indeed such communications ceased three and a half years ago. In these circumstances, the libel should be dismissed.
Some controversy arose in the argument concerning costs. I have looked at the interlocutory decree entered on February 6, 1924, and nothing is said therein concerning costs. It does appear, however, that such decree must have been in part a victory for the claimant, for the reason that it is said:
“And the Court having fihjd its opinion in writing in which it found that the steamship Hunstanworth was in all respects seaworthy, that the cargo was properly stowed and that the steamship and claimant was not liable for the softening, sprouting and discoloration of the onions and the discoloration and breaking of the packages aboard the ship, and that the libelant was entitled to recover only the damages for breakage of eases during discharge by the stevedores.”
There is raised in my mind a presumption that the failure to proceed with the proof would have entitled the claimant only to nominal damages. Admiralty courts, ás has been said, are not concerned with nominal damages. At least they are undér no compulsion to make such awards, and, if so, certainly the matter of costs is within the discretion of the court. See Herbst v. Asiatic Prince (D. C.) 97 F. 343; Munson v. Straits of Dover S. S. Co. (C. C. A.) 102 F. 926.
The motion is granted, without costs to either party. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218995/ | COSE, District Judge.
This is a motion to require a bankruptcy receiver to pay to the bankrupt the sum of $814.64, representing three disbursement items claimed as credits by the receiver in its final accounting, namely: (1) $255.37 charged for “watchman’s” and “custodian’s” expense; (2) $139.77 paid as commissions ‘for collecting outstanding accounts; and (3) $357.50 claimed as’ an excessive payment for use and occupation of leased premises. It is insisted that these three items are not properly chargeable against the bankrupt estate, and that the receiver is illegally withholding the amounts represented by them.
On May 31, 1932, an involuntary petition was filed against' the bankrupt, a. manufacturer of finished curtains, with a plant at Yonkers, N. Y., and a sales office in New York City. On the same day¿ the Irving Trust Company was appointed receiver, with enlarged powers under General Order 40 (11 USCA § 53). The order of appointment contains the following provision:
“Ordered that the Receiver be and it hereby is authorized, in its discretion and without further order of this Court from time to time during the receivership herein to employ such of the following as in its judgment are necessary for the administration of the estate, to wit: watchmen at the rate of compensation of $5 to $8 per eight-hour working day and $1 per hour for overtime; custodians at the rate of compensation of not to exceed $12 per eight-hour working day, or $2 per hour for part-time service; collection agents or agencies to collect accounts receivable of the alleged bankrupt, at a rate of compensation of not to exceed ten per centum of the gross amounts collected; the watchmen and/or cus*673todians so employed to devote such time to the affairs of the estate and to perform such services therein as the Receiver in its discretion may from time to time direct, including the taking of inventory, the examination of books of account, the gathering of information and the supervision of any sale directed herein; and it is further
“Ordered that for such purposes the Receiver may, in its discretion, retain and employ the services of its own employees; provided however, that the payment of compensation for their services to the estate in bankruptcy shall in no case, directly or indirectly, result in any saving, gain or profit to the Receiver.”
Thereafter, and while the Irving Trust Company was still acting as receiver, the bankrupt offered a composition to its creditors, and on October 21, 1932, an order was signed, confirming the composition, and directing the receiver to return to the bankrupt the remaining property in its possession. The receiver thereupon surrendered to the bankrupt the physical assets, and on November 16, 1932, turned over to the bankrupt’s attorney a check for $725.92 representing the cash balance in its hands, after deducting all disbursements and expenses of administration; and in the receiver’s final accounting, copy of which was sent to the bankrupt on November 22, 1932, the receiver credited itself with the payment of the various amounts now objected to by the bankrupt.
It is well settled that under the existing Bankruptcy Act a receiver is not entitled to anything by way of compensation for services beyond the regular statutory commissions, Bankruptcy Act, § 72 (11 USCA § 112); In re George Halbert Co. (C. C. A.) 134 F. 236; Holland v. McIlwaine (C. C. A.) 223 F. 777; In re Felson (D. C.) 139 F. 275; and this is so, regardless of the personality of the receiver or the character of the service rendered, In re Detroit Mortgage Corporation (C. C. A.) 12 F.(2d) 889. But section 62 of the Act (11 USCA § 102) expressly provides that the “actual and necessary expenses incurred * * * in the administration of estates” shall be paid; and reasonable expenditures for preserving the assets are clearly allowable, In re Mitchell (C. C. A.) 212 F. 932; as also are other actual and necessary expenses incurred in the administration of the estate. In the present case, the receiver makes no claim to compensation in addition to its regular commissions, but seeks to justify the disputed items rnerely as actual and necessary expenses incurred in the administration of the bankrupt estate.
The “watchman’s” and “custodian’s” expense of $255.37 is not to be disallowed merely because it eovers the services of persons in the regular employ of the receiver. The use of such persons is expressly authorized by local bankruptcy rule 29, which reads as follows: “The Receiver shall not employ persons merely for the purpose of guarding property when there are other adequate methods of protecting the same at less expense. He may, upon standing orders of the Court or special orders of the Court or the Referee in charge of the ease (in addition to attorneys and accountants), employ such persons as may be necessary or desirable to inventory, appraise, exhibit, sell and deliver merchandise, and/or for other purposes in connection with the proper administration of the estate, and persons in the regular employ of the Receiver may be used for such purposes. The reasonable and proper expense, thereby incurred shall be a charge against the estate. The Receiver may employ agents, at reasonable percentage rates of compensation out of collections actually made, to collect accounts payable to bankrupt estates.”
The principal reason for the designation of the Irving Trust Company as standing receiver in bankruptcy was to have a responsible and fully equipped institution to handle economically and expeditiously bankrupt estates of every kind, large and small. Manifestly, this object could not be attained if, at the commencement of each bankruptcy proceeding, the receiver were compelled to improvise a separate organization to administer the particular estate involved; and, in order to avoid any such cumbersome method of administration, the trust company was allowed to recruit a group of skilled persons capable in most instances of performing the necessary routine work required; and these persons were given regular employment by the trust company.
The services performed by such employees are of the same general character as were frequently rendered by assistants to the receiver under'the old system; and there is no reason why such services should not be compensated for out of the particular estate benefited just as much under the present system as under the old. Moreover, the trust company charges only for the actual labor cost of the various employees working on each estate; and the method adopted of computing this cost in advance, and charging for the services *674at a predetermined hourly rate, is not open to criticism. Indeed, in the ease at bar, it clearly appears that the actual out of pocket expense to the trust company of the time of the different employees engaged in work on the ease exceeded the amount charged to the bankrupt.
It is, however, insisted that the receiver has charged for services not properly allowable as administration expense, and much of the criticism in that respect is due to the somewhat unfortunate use of the terms “watchman” and “custodian” as applied to services having no proper relation to those occupations. But it is the character of the service performed, and not what it is called, which determines the validity of the charge in each particular ease.
In the present proceeding, the receiver has utilized during the period from June 1, 1932, to November 7, 1932, portions of the working time of 18 employees; and the services of these men fall roughly into the followirfg general categories: (1) Consultations by representatives of the receiver with other employees detailed to particular work on the case; (2) conferences with creditors, attorneys, officers of the bankrupt, and others interested in the proceeding; (3) correspondence, attendance before the referee, instruction of persons assigned to particular tasks, and routine office work performed at the receiver’s main office in connection with the receivership; (4) time occupied by representatives in going to and from the bankrupt’s place of business at Yonkers, or the sales office iñ New York City, to preserve the assets, inventory or appraise the property, or exhibit the merchandise to intending purchasers; (5) services performed in taking the inventory, attending at appraisals, serving papers, searching for missing records, assisting in the removal of property, and delivery of possession to the bankrupt.
The services mentioned above in (1), (2), and (3) are only such as have always been compensated for by the statutory commissions, and, except in unusual and particularly onerous eases, I do not think it is proper for the receiver to charge for them ,as administrative expense. I am satisfied, also, that payment for such services is not covered by rule 29, or by the order of May 31, 1932, appointing the receiver. With respect, however, to the services described above in (4) and (5), it has invariably been the practice in bankruptcy cases to delegate such work to outside assistants, and charge the cost as an administrative expense; and I think that under the present system the receiver is clearly entitled to credit itself with any reasonable disbursement for such purposes.
It follows that a portion of the charge of $255.37 for “watchman’s” and “custodian’s” expense must be disallowed; and, in view of the fact that the papers do not contain sufficient data to permit a separation of the item, there will have to be a further showing in order definitely to determine the amount which the receiver should return to the bankrupt.
The item of $139'.77 paid for collecting the accounts represents a flat commission of 4 per cent, on collections of $3,494.28; and it is contended by the receiver that the work was performed by an outside agency known as Estates Collection Service. The answering papers show, however, that Estates Collection Service is merely a department of the trust company, financed and operated as part of the receivership division; and neither the contract referred to in the receiver’s affidavits, nor the certificate of conducting business, filed with the state authorities, indicate anything to the contrary. I am clear, therefore, that the Estates Collection Service was not an outside agency separate and distinet from the receiver; and the language of rule 29 is not susceptible of an interpretation that the receiver may use one of its own departments for collecting accounts, and charge any part of the cost against bankrupt estates as an administrative expense. Neither does the provision in the order appointing the receiver, to the effect that the receiver may use its regular employees for such a purpose, alter the situation, as this provision, in so far as it relates to collection agents, is plainly contrary to rule 29, and, to that extent, invalid. The part of the motion directed against the collection charge of $139.77 is therefore granted.
With respect to the item of $357.50, claimed as an excessive payment for use and occupation, it is conceded that the amount paid by the receiver was the rent stipulated in the lease; and this prima facie is the reasonable value of the receiver’s use and occupation. In re Sherwoods (C. C. A.) 210 F. 754, Ann. Cas. 1916A, 940. Furthermore, the payment was made with the tacit approval of the bankrupt, and there is nothing to show that the amount was in any way excessive. The portion of the motion relating to the rent payment is therefore denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218996/ | BREWSTER, District Judge.
This petition is brought to secure the benefits of a contract of war risk insurance for $5,000 which was in force from January 25, 1918, to January 30, 1921. The petitioner claims that he became totally and permanently disabled on July 20, 1918, when he was wounded while participating in the drive near Soissons, France. On that day he was rescuing an officer who had been wounded, and while carrying him from the field he was struck in the shoulder by a piece of shell and severely wounded. He was given first-aid treatment and then taken to the field hospital, and on the 22d day of July the first operation was performed at the Red Cross Hospital at Neuilly. He was hospitalized in France and in this country until January, 1921, when, at the Walter Reed Hospital, it was thought that his wound had healed, and while waiting for his discharge it “broke down again,” and his discharge was delayed until March 4, 1921, when he was discharged as unfit for duty. During this period of hospitalization, both in France and in the United States, he underwent numerous operations— so many, in fact, that the petitioner was unable to give the total number of them. He entered upon vocational training in 1921, first in bookkeeping and then in architectural drafting. With interruptions, due to illness, he continued vocational training until 1924. In August, 1924, he entered upon placement training and continued until April, 1925. In October, 1924, while still in placement training, he was in the construction department of H. L. Doherty Company, when he was taken ill and was in a hospital where he submitted to a tonsil operation. When he had sufficiently recovered to return to work, there was no opening for him and, according to the records of the Veterans’ Bureau, training was discontinued because he had failed to avail himself of it. He thereupon entered a summer camp during the summer of 1925. During his placement training he received no salary but received compensation from the government. After he was discharged from training, he had no remunerative employment except five or six weeks in 1926 when he was with the Bosch Magneto Company, and again in 1929 when he worked a few weeks in a hotel. He was obliged, in both instances, to give up employment on account of physical ailments which, while not directly connected with his wound, were undoubtedly induced by a run-down condition which might be traceable to his wound and his hospital experiences. He did make a further attempt to earn a livelihood by taking a short training in poultry .raising, but nothing came of it.
We have here a ease where there is no evidence of gainful employment with substantial regularity. The evidence leaves no doubt that the petitioner sustained a temporary total disability, but whether the totality of the disability can be said to be permanent within the accepted definition of “permanent disability” is the real question presented. Under the contract a “permanent disability” is one founded upon conditions which render it reasonably certain that it will continue throughout the life of the person suffering from it. The government did not insure against total temporary disability or partial permanent disability.
While the circumstances of his service injury are bound to excite sympathy, the duty *676of the court is clearly to determine the rights of the parties under the contract of insurance. The petitioner, in order to recover, must establish the fact that his injury, received during the war, rendered him unable to carry on a substantially gainful occupation, not only at the time of the injury but at all times since then and that it is reasonably certain that such total disability will continue.
The fact that petitioner has not carried on a substantially gainful occupation, while furnishing in this ease strong evidence of his inability to do so, is not conclusive. Hobin v. United States (D. C.) 59 F.(2d) 224; Hanagan v. United States (C. C. A.) 57 F.(2d) 860.
It is necessary to weigh with some degree of care the medical testimony relating to the character of his wound, the diagnosis of subsequent physical conditions, and the prognosis.
As to the character of his wound, it appears that when he was injured a piece of the shell punctured and fractured the shoulder blade, and he was treated for a compound comminuted fracture of scapula and upper third of humerus. Osteomyelitis and necrosis followed, necessitating many operations upon the shoulder until it has been cut away to such an extent that only scarred tissue covers the bone. All the músete and flesh over the shoulder blade have been removed during the course of the many operations. There is a complete ankylosis of the humerus to the scapula. Blood vessels must have been destroyed in the original injury, and nerves in the brachial plexus were then injured. The brachial plexus is practically the whole nerve supply to the arm, which would mean that the veteran would suffer referred pain at his elbows and the tips of his fingers.
From the time of the injury up to November, 1932, there has been a periodical breaking down of the wound. The word “breakdown,” according to medical testimony, means a “pustular formation with pus and serum coming out,” which indicates active osteomyelitis at the time of the breaking down. An X-ray taken late in 1932 showed a sequestration, or piece of the detached bone, in the shoulder. Very little nutrition is supplied the bone.
In addition to the intermittent breaking down, which in some instances required operations and in others short periods of hospitalization, the petitioner is subject more or less to pain in his shoulder and forearm, and if he uses his light arm continuously it becomes numb. When writing, he has frequently to stop to rub the hand and forearm. He writes with some difficulty, but, notwithstanding his handicap, is able to write legibly. He has no organic disease and, although not robust in appearance, is apparently a healthy individual except for the infirmities resulting from his service injury.
According to the testimony of the psychiatrist, he found, as a result of his neurological examination, that:
“The cranial nerves were O. K. Cutaneous surfaces throughout the entire right shoulder girdle are very sensitive to pin pricks. No other objective disturbance in sensation. Vasamotor tone is reduced. Much atrophy of muscles comprising the right shoulder girdle, but particularly the deltoid which is practically gone; is but a vestige of its former self. Some of the atrophy of the muscles in the right shoulder girdle are, no doubt, atrophied from disuse, but the deltoid seemingly is the residual not only of the injury, but, also, paralysis of the right circumflex nerve. Bight hand is quite weak, and movements of right arm are more or less clumsy, no evidence of any involvement of the right museulospiral nerve. There is loss of motion in the right upper extremity, especially in shoulder. Superficial reflexes are present, equal, lively.”
His diagnosis was complete paralysis of circumflex nerve, post traumatic.
The medical experts were not fully agreed as to the resultant osteomyelitis. One view was that petitioner was suffering from chronic osteomyelitis; another that the evidence showed only healed acute osteomyelitis. As I understand the medical testimony, it supports the latter diagnosis. The attacks have been occurring with less frequency and less severity as time passes, and there is a reasonable probability that they will cease to occur at all.
This court has decided, in Hobin v. United States, supra, that the loss of one arm does not totally disable an otherwise healthy individual, and this in a ease where the evidence disclosed no continuous period of gainful occupation. Petitioner would distinguish the case at bar by pointing to the testimony of his doctor, who stated that, in his opinion, Dupuis was “more .disabled than he would be if he had no right arm.” This opinion was apparently based upon the statement of the petitioner that he still suffered pain in his shoulder and arm and the possibility of the recurrence of the osteomyelitis. The government's experts, on the other hand, testified *677that his disability was' less than it would have been if his arm had been amputated at the shoulder. My opinion on this aspect of the ease coincides with that of the government witnesses. The right hand and forearm still function and are far from useless. His handicap undoubtedly will tend to limit the field of gainful occupation which he may pursue, but such field is by no means closed to him. He may not be able to do work which would put a heavy strain on his right shoulder or which would require constant use of his right hand. But petitioner had a fair education, is intelligent and of good appearance, and, aside from his wound and its effects, he is healthy. His writing is easily read, and his period of training in architectural drawing evidences his capacity to make use of the injured member.
I can see no grounds upon which the ease can be distinguished from Hobin v. United States, supra. That ease seems to be in harmony with decisions in other circuits involving the loss of a limb. See United States v. Thomas (C. C. A.) 53 F.(2d) 192; United States v. Ivey (C. C. A.) 64 F.(2d) 653; Hanagan v. United States, supra; United States v. Cornell (C. C. A.) 63 F.(2d) 180; United States v. Mayfield (C. C. A.) 64 F.(2d) 214; United States v. Harris, 66 F.(2d) 71 (C. C. A. 4th Circuit) June 24, 1933.
Defendant’s motion for a judgment is allowed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218998/ | FRANK J. COLEMAN, District Judge.
The only question presented is whether the bankrupts’ credit balance in the Central Hanover Bank So Trust Company was completely exhausted on October 10, 1931, abóut a month before the filing of the petition in bankruptcy. At the latter time there was a credit balance of $183,355.60 which various reelaimants are seeking to obtain on the ground that it included various trust funds of which they were beneficial owners; and the trustee moved to dismiss such of the claims as were based upon a tracing of the *680trust funds into the account prior to October 10, 1931, upon the ground that on that day the credit balance was entirely depleted, so that regardless of reelaimants’ ownership of the original deposits they are not entitled to share in the credit balance subsequently built up and taken over by the trustee. The referee granted the motion on the merits, and on this petition to review there is presented only the question whether any of the bankrupts’ credit balance of October 9th survived the following crucial day. To avoid misunderstanding in further proceedings, it is specifically stated that if any part survived there has been no attempt to determine the amount of it, nor whether these reelaimants are entitled to share in it.
Before undertaking the task of stating the complicated facts,.I am impelled to express appreciation of the extraordinarily thorough and helpful briefs of counsel and to state that any divergence in our views has been through no lack of intelligent and painstaking efforts on their part. The whole subject of tracing trust funds is fraught with legalism, so that the foundation and the defeat of rights depend upon purely accidental circumstances to an extent which the common man would find difficult to reconcile with his concepts of justice. When principles which would have been plain enough in relation to choses in possession are attempted to be applied to intangibles, the result is apt to be an unfortunate technicality.
For the purposes of this decision, the following facts may be assumed: The bankrupts’ credit balance at the close of October 9th was $111,217.43; during October 10th the bank collected for and added to the account $57,329.33 and paid out of and charged against it $107,777.47. If there had been no other transactions there would have been a credit balance of $60,769.29 at the close of October 10th. But there were two other classes of transactions that day, certifications, which were not paid until the next business day, October 13th, and deposits of third parties’ cheeks which were not collected till the next business day. The question to be decided involves the effect on the account as of October 10th of these certifications and deposits of cheeks. The certifications aggregated $128,779.87 and if deductible from the credit balance on October 10th would .have more than exhausted it unless the cheeks which had been previously deposited on that day but were not collected till the next business day, aggregating $252,839.92, could properly be included in the balance for October 10th. It should be noted that the entries on the records of the bank made on October 10th purported to give immediate effect to both the certifications and the deposits of these cheeks so that if the entries correctly represented the legal rights of the depositor a credit balance was maintained throughout the day and at the close amounted to $184,829.34.
1. Considering first the checks deposited on October 10th but not collected till the next business day, the New York Negotiable Instruments Law, § 350-a, provides:
“Bank as agent for collection. Except as otherwise provided by agreement and except as to subsequent holders of a negotiable instrument payable to bearer or indorsed specially or in blank, where an item is deposited or received for collection, the bank of deposit shall be agent of the depositor for its collection and each subsequent collecting bank shall be sub-agent of the depositor but shall be authorized to follow the instructions of its immediate forwarding bank and any credit given by any such agent or sub-agent bank therefor shall be revocable until such time as the proceeds are received in actual money or an unconditional credit given on the books of another bank, which such agent has requested or accepted. Where any such bank allows any revocable credit for an item to be withdrawn, such agency relation shall nevertheless continue except the bdnk shall have all the rights of an owner thereof against prior and subsequent parties to the extent of the amount withdrawn.”
Section 35(be. “ * * * Where a deposited item is payable to bearer or indorsed by the depositor in blank or by special indorsement, the fact that such item is so payable or indorsed shall not change the relation of agent of the bank of deposit to the depositor, but subsequent holders shall have the right to rely on the presumption that the bank of deposit.is the owner of the item. * * *”
The passbook of the depositor and the periodic statements of account sent by the bank contained this provision:
“This Company in receiving checks and other items, whether for credit or collection, acts only as your agent for forwarding or presenting the same for payment in cash or bank draft either through our correspondents or directly to the bank or trust company upon which they are drawn, and does not assume any responsibility for the acts of correspondents, or loss in mail. .We endeavor to use all proper means to avoid delays in collections, but you agree in all cases that we are as such agents to avail of the usual course of business and that we are to charge back the *681amounts of any of such cheeks or other items in the event that the proceeds thereof in cash are not received by us (whether or not the cheeks or items themselves can be returned) and not to advise specially as to the payments unless we have special written instructions.
“All checks and other items drawn on and deposited with us are credited conditionally only, and are subject to being charged back if- upon investigation by us it is found that there are not sufficient funds or credits available for payment thereof.”
The contract between the bank and Kountze Brothers as embodied in the above statement was never expressly modified, and if it was not impliedly changed by the course of conduct of the parties and other circumstances, the bank received the checks in question only as agent for the depositor, title did not pass, no debt was created as to them between the bank and the depositor until they were collected, the credit entries in the depositor’s passbook and account were merely tentative and the depositor had no legal right to draw cash against them or obtain credit upon them until their collection. In that situation they could not be deemed to have been added to the depositor’s credit balance on October 10th so as to have prevented a depletion of it by drawings on that day.
Upon the question whether there was an implied modification of the contract, it appears that if checks so deposited had previously been certified by another New York bank or were cashier’s checks, the Central Hanover Bank & Trust Company regularly extended credit against them by certifying the depositor’s checks in excess of what would have been the credit balance without them. Of the $252,839.92 so deposited on October 10th, $200,000 was represented by a cashier’s cheek and by a certified cheek, both of New York banks, and after their deposit the Central Hanover Bank & Trust Company certified a check of the depositor far in excess of the credit balance if those cheeks were not included in it.
Those circumstances do not seem to me to indicate a modification of the express contract. The depositor’s account can be viewed as having two separate parts; the debt unconditionally owed by the bank to the depositor, and the checks held by the bank for collection as agent for the depositor. As to the latter items there were correlative rights and obligations, but they did not constitute a part of the debt until their collection; the depositor could hold the bank to reasonable diligence, and, on the other hand, the bank had a lien upon them for all moneys paid or obligations incurred in the account in excess of this amount of the debt. It was only the debt which was truly the credit balance, and the tentative crediting of the checks deposited, while in form indicating an increase in the debt, actually had no such effect because it was done subject to the provisions of the express contract. The bank’s certification in excess of the debt was in reliance on its rights over the other part of the account and not in recognition of an increase of the debt by the other items contrary to the express provisions of the contract. The depositor had no legal right to demand payment against these items until by collection they beeame part of the debt, and if the bank saw fit to certify against them it was not by virtue of any contractual obligation, but purely as a matter of favor which the bank was willing to extend because of the strong security and because in ordinary course the certifications would not have had to be paid until the deposited cheeks were collected.
The conclusions of law testified to by the various witnesses should be disregarded. We are concerned with the actual debt owing to the depositor because the reelaimants allege that it contained their trust moneys, and the condition of the other part of the account we are not concerned with, except in so far ass it may have affected the debt. The witnesses were plainly not distinguishing between the debt and the account, and their views as to th© condition of the account are not only incompetent, but misleading. The question is whether the debt was increased by the mere deposit of the cheeks without their collection, and that must be determined by the contract under which they were deposited and not from the legal views of witnesses. That contract was express and, as already stated, was not modified by the practice of the parties in regard to certification which had no essential relation to the amount of the debt.
2. Since the debt was not increased on October 10th by the deposits in question, it remains to be determined whether it was wiped out by the certifications on that day. These amounted to $128,779.87, or over $68,000 in. excess of the debt, but the certified checks were not paid until the next business day at a time when the debt had been increased by the collection of the deposited cheeks to an extent far more than sufficient to cover th© certifications. The question is whether the certified cheeks may be deemed to have been paid entirely out of the collections on the cheeks deposited on October 10th or may ba *682deemed to have been paid out of the credit balance on October 10th to the amount of it and, as to the balance, out of the collections made the next day. The certifications were charged by the bank against the account on October 10th, but there was no attempt to distinguish between the debt and the other part of the account. At the time the certifications .were made the account already contained the checks deposited for collection.
Undoubtedly if instead of certifying the checks the bank had paid them on October 10th, the debt would have been, deemed extinguished at that time and a new indebtedness created running to the bank for the amount of the excess of $68,000 to secure which the bank would have held the uncollected checks in the account. It would have been reasonable to assume that a debtor in paying money intended in the first instance to extinguish his debt. But in making the certifications the bank parted with no money; it did not even incur a new obligation at that particular moment. These certifications were procured by the depositor before the delivery of the cheeks to the payees, and until such delivery neither the cheeks nor the certifications had a valid legal existence. At the time of making the certifications and the charges against the depositor’s account the bank was merely in danger of a new liability which would never arise unless the depositor delivered the cheeks to the payees. The bank had no way of knowing when the delivery would be made, and this record does not satisfactorily show when it actually occurred, though it may be surmised that it was on October 10th. Furthermore, even after delivery the bank could have been held on its certification only on the order of the payee who instead might surrender the cheek to the depositor.
Under these circumstances it does not seem to me that the mere certifications extinguished the debt owed by the bank to the depositor. They ultimately were the basis of a liability to the payee which the bank in ordinary course would not be required to meet till it had collected far more than that amount on the deposited cheeks, and in the meantime the bank held as security all the depositor’s assets in the account. Certainly there was no actual intention on the part of the bank to extinguish the debt, because its own records credited the depositor with a balance of $184,829.-34 at the close of the day, and the testimony showed an entire willingness to certify against the deposited cheeks (to the extent of $200,000 represented by the cashier’s check and the cheek certified by another bank), regardless of the amount of the debt. Though the bank formally charged the account with the amount of the certifications at the time they were made, this was not necessarily a charge against the debt, but rather against the entire account, and made merely for the purpose of curtailing the depositor’s drawings until the bank had reimbursed itself for a possible liability on the certifications.
One incident of the debt was the depositor’s right to have checks eashed against it, but it seems to me that this right might be held in abeyance without an extinguishment of the debt. In the present ease the bank by its certifications at the instance of the depositor was in danger of future liability to the payees; and it was entirely reasonable that it should protect itself by a charge against the entire account which would prevent the depositor from drawing cash or procuring further certifications except at a time and in amounts which would leave the bank fully protected. In other words, the bank had the right to hold the credit balance and the uncollected checks as security for its possible liability which might arise in the future, and the charge against the account was merely its means of maintaining that security. It was not an extinguishment of the debt because of a liability which might never arise.
It is true that a bank in charging a certification against a depositor’s account in a sense appropriates something that was in the account to the payment of the check certified. If there is only a credit balance in the account without any uncollected checks, and if the liability on the certification is certain, it may perhaps be proper to consider the appropriation as extinguishing the debt pro tanto or effecting an assignment of it from the depositor. But in the present case the uncertainty as to the bank’s new liability, the possibility of the charge being levied against something other than the debt, and the absence of any actual intention to extinguish the debt, make it improper to give the certifications that legal effect. The more reasonable ruling would be that they and the charge against the account had merely the effect of holding all the assets in the account, including both the debt and the uncollected cheeks, as security for the bank’s reimbursement in case of future payments on its certifications.
The petition to review is therefore sustained, and the order of the referee reversed, with direction that the matter be remitted to him for further proceedings. Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7218999/ | BREWSTER, District Judge.
A creditor of the above bankrupt seeks a review of an order of the referee disallowing its claim to the extent of $15,000. The facts are set forth clearly and succinctly in the referee’s certificate, as follows:
“The bankrupt was a family corporation. All of the stock was originally owned by George, Isaac and William McLean.
“In January, 1930, Isaac and William McLean went to Arthur P. Stone, Vice-President of the Atlantic National Bank- and told Stone that William needed $15,000. to pay off a mortgage on some property which William OAvned in Cambridge.
“Stone had Isaac and William McLean make a note payable to the McLean Store Fixtures Corporation. The corporation, by George McLean, its treasurer, endorsed this note. The Atlantic National Bank discounted it and turned the money over to William McLean, to be used to pay off the mortgage on his own property at Cambridge. Stone knew perfectly well at the time that the money advanced by the Bank on this note was to be used by William for his oato benefit and that not one cent of the proceeds was to go into the treasury of the corporation.
“This note was renewed six or eight times in just the same form. Finally, in February, 1932, Stone got impatient and said he would have to have it paid. Isaac and William, the makers of the note, said they didn’t have any money. After some discussion, Stone agreed to take the note of the Corporation, payable in thirty days, in renewal of the old note made by the individuals, Isaac and William. A note was made by the Corporation and signed by Isaac, who had become president and treasurer, payable to Isaac as an individual, was endorsed by him and turned into the Bank. No consideration was ever given the Corporation for 'this note. No vote of the stockholders or directors ever authorized, or ratified, the making of this note.”
Upon these facts, I think the referee’s order disalloAving the claim based upon the note for $15,000 was correct.
In the first transaction, the bankrupt clearly became an accommodation indorser. While a private corporation may be held liable on an accommodation indorsement, it is only when all the stockholders consent and the rights of creditors are not thereby injured. Murphy v. Arkansas & L. Land & Improvement Co. (C. C.) 97 F. 723; In re Amdur Shoe Co. Inc. (D. C.) 13 F.(2d) 147; Cook on Corporations (5th Ed.) §§ 3, 774.
It does not clearly appear from the referee’s certificate whether, at the time the note Avas indorsed, all who were then stockholders participated in the transaction, but he does find that there was no vote of the shareholders or directors authorizing it. However this may be, the indorsement was prejudicial to creditors and did not come within the rule respecting the liability of private corporations on accommodation paper. New Hampshire National Bank v. Garage and Factory Equipment Co., 267 Mass. 483, 166 N. E. 840; Pierce, etc., Mfg. Corp. v. Daniel Russell *684Boiler Works, Inc., 262 Mass. 242, 159 N. E. 625; Boston Box Co., Inc., v. Shapiro, 249 Mass. 373, 380, 144 N. E. 233.
The note given by the bankrupt to Isaac McLean and indorsed to the Atlantic National Bank was not given to compromise any doubtful controversies which had arisen between the bank and the bankrupt. It was given as a substitute for the earlier note made by Isaac and William McLean and indorsed without' consideration by the corporation. The only difference resulting from the change of procedure was to make the corporation an accommodation maker, instead of the accommodation indorser. It did not operate to create liability on- the part of the corporation any more than the indorsement. This note was given without any benefit, or consideration, moving to the bankrupt. The bank gave up no rights against the corporation which it had as indorsee, since it acquired none by virtue of the accommodation indorsement. The note was neither authorized nor ratified by the shareholders or directors, and was equally prejudicial to creditors.
The referee’s certificate leaves no doubt respecting the knowledge of the officers of the bank relative to the exact nature of the transaction. The bank must be held chargeable with knowledge of the infirmities in the instrument, and was not, therefore, a holder in due course.
The referee’s order is confirmed | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219001/ | PATTEKSON, District Judge.
An involuntary petition in bankruptcy was filed against Joseph Kupfer on September 20, 1932. The act of bankruptcy alleged was the making of an assignment for the benefit of creditors. The answer interposed by Kupfer is to the effect that the three petitioning creditors, because of participating in the proceedings under the assignment, are estopped to resort to the bankruptcy court.
The assignment for the benefit of creditors was made on May 19, 1932, and filed in the county clerk’s office two days later. The assignees -qualified, retained attorneys, and sold the physical assets pursuant to an order of the New York Supreme Court and on notice to creditors. On June 11th KupfePs nominee made an offer to the assignees to purchase all the assets and to pay 50 per cent, of the creditors’ claims; 49 per cent, in cash, and 10 per cent, in notes. This offer was approved by the court but was not carried out by Kupfer. Instead a second offer was made on July 19th, in which the cash payment was reduced to 30 per cent, and the note payment was increased to 20 per cent. This offer also was approved by the court, but was not carried out by Kupfer. Claims to the extent of some $25,000 not listed by him had been filed, and he expressed his inability to raise the necessary money. Shortly thereafter the three petitioning creditors filed the petition in bankruptcy.
It appears that they had already filed claims with the assignees. They had also attended a meeting of creditors where one of them had voted for the appointment of a creditors’ committee, and they had received various notices sent out to creditors in the assignment proceedings. It also appears that the assignees paid compensation to themselves, their attorneys, and others. Some of these payments were on the approval of the creditors’ committee. There is nothing to show, however, that any of the three petitioning creditors were cognizant of the payments.
The special master to whom the issues were referred has reported that the creditors were not foreclosed from filing the petition in bankruptcy. I am of the same opinion.
A creditor who induces his debtor to make a general assignment is estopped to complain of it as an act of bankruptcy. Otherwise the creditor could entrap the debtor into becoming an involuntary bankrupt. In re Goldman-Rosenzweig Co., 65 F.(2d) 390, recently decided by the Circuit Court of Appeals of this circuit. And a creditor who, after the assignment has been made, assents to it and participates actively in the proceedings is generally held to have elected his remedy and is barred from later filing an involuntary petition based on the assignment. Simonson v. Sinsheimer (C. C. A.) 95 F. 948; Durham Paper Co. v. Seaboard Knitting Mills (D. C.) 121 F. 179; Moulton v. Coburn (C. C. A.) 131 F. 201. In the present case the petitioning creditors were passive. They did not urge the alleged bankrupt to make the assignment for creditors, nor did they afterwards identify themselves as approving of it. The mere filing of claims in obedience to the order of the court was not a participation of sufficient weight to constitute an election. In re Curtis (C. C. A.) 94 F. 630. Nor was the voting for a creditors’ committee; this step did not commit the creditor in favor of the assignment. The alleged bankrupt makes much of the participation of the creditors’ committee in the ease, but the committee was not the agent of the petitioning creditors and the latter are not bound by what the committee saw fit to do.
It is true that the petitioning creditors waited around for a considerable time before attacking the assignment. But the fault here was with the alleged bankrupt rather than with them. He omitted from his listed liabilities several large claims owed by him, and when these claims were filed he found himself unwilling or unable to perform the terms of the settlement which he had tendered under *690the assignment. There is no doubt that the hope of consummating such a settlement was a factor in making the creditors acquiescent to the assignment, nor is there doubt that it was the failure of the proposed settlement that precipitated the filing of the petition in bankruptcy. See Simonson v. Sinsheimer (C. C. A.) 100 F. 426. Even if we assume that the petitioning creditors committed themselves to a liquidation through the assignment proceedings, the failure of their debtor to reveal the existence of large liabilities, whether or not an intentional failure on his part, gave them the light to rescind their commitment and to insist upon a liquidation in bankruptcy. The facts show that they were prompt in exercising this right, once the presence of the undisclosed liabilities was made known to them.
The ease is not within the doctrine of estoppel or election of remedies. An order of adjudication may be entered. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219004/ | BOURQUIN, District Judge.
In this suit to cancel defendant’s certificate of citizenship issued in June, 1894, the charge is that when he applied for the same he did not intend to become a permanent citizen of the United States.
Service was by publication and defendant made 'default. At final hearing the only evidence presented, and by plaintiff counted upon, is defendant’s alleged letter following service, to the clerk of the court. Therein he frankly states that in the fall of 1894 he returned to the land of his nativity, Nova Scotia, at all times since has there resided, and now sixty-five and his “rambling days” over, he does not intend to return to the United States.
Plaintiff contends that in its behalf this suffices to establish a prima facie case, within 8 USCA § 405.
If the letter be accepted as authentic without other evidence, the contention is to be sustained.
But the letter also contains the countervailing evidence by said statute contemplated. For therein defendant proceeds to set out his motive, purpose, and intent at the time of admission to citizenship and thereafter, in substance, that theretofore he had lived in Anaconda for ten years, was employed in positions of responsibility, and “liked the place well”; that eleven months before admission he suffered fracture of the skull and other injuries which near fatal, incapacitated him for nine months; that restored to his employment, in the fall of 1894 his health was poor, and “advised by a doctor” to return to Nova Scotia, he did to escape the local cold climate; that “I intended to come back in the spring but I changed my mind and am still in Nova Scotia. I never re-established after coming back to Canada. I simply got papers which gave me political privileges, which read I can be deemed a citizen of the U. S. A. any time I went back. I did not want to take any more vows of allegiance”; and that he desires to retain his citizenship herein for that otherwise his daughter bom during it will be, as she has been, denied the right to enter the United States to resume her employment. Although these latter are self-*694serving statements, they are a part of the letter containing the dis-serving statements upon which plaintiff relies, are explanatory, and in the circumstances are equally in evidence and entitled to consideration.
They ring true, inspire confidence in their credibility, clearly avoid the prima facie ease otherwise made, and manifest that the charge made fails of proof.
The finding necessary to sustain the issue, and to the relief by plaintiff prayed, is that at the time admitted to citizenship, defendant did not intend to become a permanent citizen of the United States, and that finding is not warranted by the evidence.
Were there no more than reasonable doubt, it would suffice to deny relief. Tike any solemn public grant, that of citizenship cannot be lightly canceled. See Knight’s Case (United States v. Knight) (D. C.) 291 F. 129.
The naturalized citizen’s resumption of residence in the land of his birth, however soon and however long, is immaterial, provided his intent at admission is to continue a permanent resident and citizen of the United States. So much the statute requires and no more. Thereafter, he has the same right as the native bom to go when and where he please, to reside where and as long as he please.
Suit dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219005/ | BYERS, District Judge.
This is a motion made September 20, 1933, to suppress evidence, by a defendant who has been held by a United States Commissioner upon a complaint verified August 19, 1933, by a boatswain’s mate in the .Coast Guard, but no information or indictment has been filed.
The petitioner was acting as master of the pleasure motor yacht Felicia on August 18, 1933, when at about 10 a. m. (the vessel being in the vicinity of Little Gull Light in the eastern end of Long Island Sound) she was signaled to stop by the Coast Guard patrol' boat No. 176, and obeyed.
A petty officer came aboard and asked the-petitioner for permission to search the vessel, and was told to “go ahead.” The search proceeded without objection, and resulted in the discovery below decks, in a space forward-of the engine room, of a considerable quantity of bottles labeled to indicate intoxicating-liquors, contained- in burlap sacks.
All on board (about 10 men and 2 women) were placed under arrest; the vessel was seized and taken to New; London, where Base 4 of the Coast Guard is located.
The boarding was made after advices had been received at the Base, that the Felicia was said to have come into the Sound past Montauk Point on June 24, 1933, and to have unloaded a quantity of intoxicating liquor.
The affidavit of the officer in charge of Coast Guard 176 states that he had been told that the vessel had been engaged in smuggling operations, and the source of the information is somewhat disclosed in the moving papers.
The complaint under which the Commissioner held the petitioner and the other def*695endants alleges that the defendants conspired to violate section 593 (a) and (b) of the Tariff Act of 1930, 19 USCA § 1593 (a, b), as well as certain provisions of the National Prohibition Act (27 USCA § 1 et seq.).
United States v. Powers (D. C.) 1 F. Supp. 458, is cited as indicating why this motion should be granted. It is thought that the eases are to be distinguished upon the facts.
It was sought to be shown, in that opinion, that the affidavits clearly revealed that the only purpose attributable to the officers of the Coast Guard was a search upon which to base a claim for prohibition law violation on the part of a fishing vessel, and that no reasonable cause to make the search was shown.
Here the conduct of the boarding officer, and the averments in the opposing affidavits are entirely consistent with a search undertaken to ascertain.if the Felicia was in fact engaged in smuggling operations. Certainly it cannot be said that the contrary so clearly appears that the court would be justified in disposing of the motion upon that theory.
The authority of the Coast Guard to board American vessels in order to detect and frustrate smuggling cannot be questioned in the light of all that has been enacted and decided on the subject. Nor is it likely that the immediate or remote future will render this exercise of governmental function any less important than it is now.
In denying the motion, the right-is reserved to renew upon the trial, if any, if the defendants be so advised.
Settle order. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219006/ | WOOLSEY, District Judge.
The within motion is granted.
The question whether a trustee in bankruptcy should disaffirm or has disaffirmed a lease is a matter of administration of which the bankruptcy court wherein the trustee has been elected and qualified has jurisdiction, and which in the interest of the orderly administration of the bankrupt estate must be dealt with therein.
The mooted question of personal service of the injunction on the plaintiffs in the action of J. & D. H. Caplan v. Trustees in Bankruptcy of the Liggett Company now pending in Erie county .in the New York Supreme Court does not present any obstacle to the bankruptcy court here, for by ancillary proceedings in the Northern district of New York the writ of injunction'sought may be served in Buffalo. See Babbitt, Trustee, v. Dutcher, 216 U. S. 102, 114, 50 S. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, and In re Elkus, Petitioner, 216 U. S. 115, 116, 117, 30 S. Ct. 377, 54 L. Ed. 407.
Accordingly I have signed the order submitted by trustee’s counsel at the argument and return it herewith. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224467/ | *378
MEMORANDUM OPINION
ANDREWS, U.S. DISTRICT JUDGE:
Before the Court are the defendant’s motion for judgment on the pleadings (D.I.17) and the related briefing (D.I.18, 20, 22). For the reasons discussed, Sci-Quest, Inc.’s motion is granted in part and denied in part.
BACKGROUND
In 2008, Ion Wave Technologies, Inc. (“IWT”) and SciQuest, Inc. entered into a referral and resale agreement whereby SciQuest would sell IWT’s software. (D.I. 1 at 2, ¶¶ 6-7). The agreement stated that SciQuest would use its standard Master License and Services Agreement (“MLSA”) when providing its clients with IWT software. (Id., ¶ 8). Among the clients were the University of Connecticut Health Center (“UCHC”) and the Medical University of South Carolina (“MUSC”). (Id. at 3, ¶ 13). UCHC entered into a five-year MLSA with SciQuest, which was to end in 2013. (Id., ¶ 14). MUSC had a seven-year MLSA, which was to end in 2017. (Id. at 5, ¶ 23).
The parties terminated the referral and resale agreement by mutual consent in 2011. (Id. at 4, ¶ 18; D.I. 18, p. 1). After the termination, SciQuest amended the MLSAs with two of its customers, UCHC and MUSC, and transitioned them off of the IWT software to SciQuest’s own product, which deprived IWT of royalties. (D.I. 1 at 4, 6, ¶¶ 21, 30; D.I. 18, p. 1). In October 2012, IWT filed this suit against SciQuest for (i) breach of contract, (ii) anticipatory repudiation, (iii) breach of the implied covenant of good faith and fair dealing, and (iv) violation of the North Carolina Unfair and Deceptive Trade Practices Act. (D.I. 1 at 11, ¶¶ A-D). As a result of the Rule 16 conference and mediation, the parties identified early resolution of a discrete contract interpretation issue as being helpful. (D.I.18, p. 1, n. 1).
SciQuest filed a motion for judgment on the pleadings under Fed. R. Civ. P. Rule 12(c). (D.I.17). SciQuest argues that the provision of the agreement that required SciQuest to get IWT’s permission to amend MLSAs with clients did not survive the termination of the agreement under Section 11.3, which established the rights and responsibilities of the parties in case of termination. (D.I. 1-1 at 15-16, „§ 11.3; D.I. 18, pp. 1-2). IWT argues that Sci-Quest had “a continuing ’ post-termination obligation” arising from Section 11.3(d), which says that SciQuest must “fulfill its reporting and payment obligations” and that it must “use commercially reasonable efforts to ensure that SciQuest customers of the IWT Sourcing Solution fulfill their license agreement obligations with respect to the IWT Sourcing Solutions.” (D.I. 1-1 at 15-16, § 11.3(d); D.I. 20 at 4-5).
DISCUSSION
A. Legal Standard
A Rule 12(c) motion for judgment on the pleadings is reviewed under the same standard as a Rule 12(b)(6) motion to dismiss when the Rule 12(c) motion alleges that the plaintiff failed to state a claim upon which relief can be granted. See Turbe v. Gov’t of the Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991); Revell v. Port Auth., 598 F.3d 128, 134 (3d Cir.2010). The court must accept the factual allegations in the complaint and take them in the light most favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007); Christopher v. Harbury, 536 U.S. 403, 406, 122 S.Ct. 2179, 153 L.Ed.2d 413 (2002). “When there are well-ple[d] factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Ash*379croft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court must “draw on its judicial experience and common sense” to make the determination. See id.
B. Decision
SciQuest’s request for judgment on the pleadings requires this Court to interpret the IWT-SciQuest agreement as a question of law. The agreement states that it is to be interpreted under North Carolina law. (D.I. 1-1 at 18, § 12.17).
The IWT-SciQuest agreement is unambiguous, in my view. Tn addition, there are no identified disputes of fact for Counts I—III. Therefore, those counts are appropriate for resolution on the pleadings. See Root v. Allstate Ins. Co., 272 N.C. 580, 158 S.E.2d 829, 832 (N.C.1968) (“It is a well-recognized principle of construction that when the language of a contract is clear and unambiguous, the court must interpret the contract as written[.]”); e.g., Moseley v. WAM, Inc., 167 N.C.App. 594, 606 S.E.2d 140, 142 (2004).
Two provisions of the agreement are relevant here: Sections 3.2(e) and 11.3. Section 3.2(e) provided that SciQuest could make changes to a MLSA as long as IWT approved the changes that would impact IWT’s rights or performance. Section 11.3 established the effects of the termination of the IWT-SciQuest agreement upon the agreement. Section 11.3(c) listed the parties’ rights that survived the termination. It did not include the rights listed in Section 3.2(e). Section 11.3(d) provides generally that other rights and specified obligations will also survive termination of the IWT-SciQuest agreement until “termination or expiration” of the last MLSA. (D.I. 1-1 at 16, § 11.3(d)(iii)). In particular, Section 11.3(d)(iii) states that SciQuest “shall continue to ... use commercially reasonable efforts to ensure that SciQuest customers of the IWT Sourcing Solution fulfill their license agreement obligations with respect to the IWT Sourcing Solutions[.]” (Id.).
The parties dispute whether Sci-Quest and its clients could amend their MLSAs after the termination of the IWT-SciQuest agreement. The list of rights that survived termination did not include IWT’s right to approve material changes to customers’ MLSAs. (D.I. 1-1 at 15, § 11.3(c)). Thus, the right to approve amendments did not survive under the rule of expressio unius est exclusio alteri-us (the expression of one is the exclusion of the other). See Charlotte Union Bus Station v. C.I.R., 209 F.2d 586, 589-90 (4th Cir.1954); Smith Barney, Inc. v. Critical Health Sys. of N.C., Inc., 212 F.3d 858, 861 (4th Cir.2000).
The remaining question, and the focus of the parties’ arguments, is whether SciQuest violated Section 11.3(d)(iii) when it transitioned UCHC and MUSC to its own software. IWT argues that by “actively seeking to terminate [the] license agreement obligations,” SciQuest was not meeting its obligation to use commercially reasonable efforts to ensure that its customers fulfilled their own license agreement obligations to IWT. (D.I. 20 at 11). This Court disagrees. This issue turns on the definition of the customers’ “license agreement obligations.”
This Court’s view is that “license agreement obligations” refers to obligations under the MLSA as the obligations accrue. Thus, the MLSA could be terminated by agreement of SciQuest and its customer. This interpretation is consistent with the IWT-SciQuest agreement and the MLSA. It also accords with the business realities brought about by termination of the IWT-SciQuest agreements.
*380First, the phrase at issue also appears in the third sentence of Section 3.1(d) of the IWT-SciQuest agreement, where it does not require SciQuest to get IWT’s permission to modify its MLSAs with customers. (D.I. 1-1 at 7, § 3.1(d)). The preceding sentence in Section 3.1(d) explains that SciQuest and its customers may amend their MLSAs with IWT’s approval. (Id.). To find that the third sentence means the same thing as the second sentence would render one of the sentences superfluous. See Ray D. Lowder, Inc. v. N.C. State Highway Comm’n, 26 N.C.App. 622, 217 S.E.2d 682, 693 (1975) (“[A]n interpretation which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or superfluous!.]”). In Section 11.3(d)(iii), the language is exactly the same, but there is no additional sentence requiring SciQuest to seek IWT’s permission to modify its MLSAs. Therefore, this Court finds that Section 11.3(d)(iii) allowed SciQuest and its customers to modify their agreements.
Second, the MLSA required SciQuest to try to ensure that its customers fulfilled the license agreement obligations listed in the MLSA. These MLSA obligations included specific obligations to IWT. For example, customers were not allowed to register one username for more than one person on IWT software. (D.I. 1-1 at 35, § 1.2). Customers were supposed to use commercially reasonable efforts to ensure that the information uploaded and the business performed on IWT’s software was legal and accurate. (Id.). Customers were also not to permit others, including subsidiaries, affiliates, and contractors, to use the IWT software. (Id., § 1.3). Further, the agreement prevented customers from transferring, renting, or subletting their software licenses. (Id., §§ 1.2 — 1.4). Finally, under the MLSA, customers had confidentiality obligations to IWT. (Id. at 38, § 7.1). IWT had Section 11.3(d)(iii) in its agreement with SciQuest to ensure that customers would continue to fulfill their obligations after termination, not to prevent SciQuest and its customers from modifying the agreement to change software products.
Third, IWT had no rights under the MLSA. Section 8.13 of the MLSA states that no third party may be a beneficiary to the MLSA. (D.I. 1-1 at 39, § 8.13). IWT’s rights stem from the IWT-SciQuest agreement, not the agreements between Sci-Quest and its customers. Therefore, Sci-Quest and its customers did not need IWT’s permission to modify their MLSAs.
Fourth, it seems unlikely that the parties intended for SciQuest and its customers to be unable to amend their MLSAs once their agreement terminated. For example, if a customer’s software needs changed and SciQuest agreed to alter the agreement, then SciQuest and the customer should not need IWT’s approval once their referral and resale agreement ended. As SciQuest put it, those contracts would be “frozen in time.” (D.I.18, p. 8).
Regarding Claim IV, which alleges that SciQuest violated the North Carolina Unfair and Deceptive Trade Practices Act, the Court cannot resolve this issue based on the pleadings. IWT alleges, “SciQuest has committed unfair or deceptive acts or practices, and engaged in unfair methods of competition within the meaning of N.C.G.S.A. § 75-1.1.” (D.I. 1 at 9, ¶ 53). SciQuest denies it. (D.I. 7 at 6, ¶ 53). There are material factual disputes, making this issue unsuitable for judgment on the pleadings.
In sum, SciQuest did not violate its contract with IWT. SciQuest’s Motion for Judgment on the Pleadings is granted for Count I (Breach of Contract), Count II (Anticipatory Repudiation), and Count III *381(Bread of the Implied Covenant of Good Faith and Fair Dealing) and denied for Count IY (Violation of North Carolina Unfair and Deceptive Trade Practices Act).
A separate order will be entered.
ORDER
Before the Court are the defendant’s motion for judgment on the pleadings (D.I.17) and the related briefing (D.I.18, 20, 22). For the reasons stated in the accompanying Memorandum Opinion, it is ORDERED that Defendants’ Motion is GRANTED IN PART as to Counts I, II, and III, and DENIED IN PART as to Count IV. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224468/ | FINDINGS OF FACT & CONCLUSIONS OF LAW
KEVIN McNULTY, District Judge.
This case requires the Court to evaluate the decision by the Zoning Board of Ad*382justment of the Borough of Paramus (“Defendant” or “Board”) to deny the applications of Sprint Spectrum L.P. and T-Mobile Northeast LLC (collectively “Plaintiffs” or “Carriers”) to construct a wireless communications facility. Plaintiffs filed this action for declaratory and injunctive relief against the Board for violations of the Telecommunications Act of 1996 (“TCA”) and the New Jersey Municipal Land Use Law (“MLUL”).
The Carriers have two essential claims. First, they contend that the Board’s denial is an effective prohibition of service in violation of the TCA, 47 U.S.C. § 332(c)(7)(B)(i)(II). The Board, they say, denied an application to fill a significant gap in wireless service despite the lack of any feasible, available, less-intrusive means to fill the coverage gap. That claim is a federal-law cause of action as to which this Court may take independent evidence, in addition to reviewing the record already compiled. Second, the Carriers contend that the Board’s denial was not supported by substantial evidence, under the TCA, 47 U.S.C. § 332(c)(7)(B)(iii), and the MLUL, N.J. Stat. Ann. 40:55D-1 et seq. A decision on that second claim is based on this Court’s review of the record that was compiled before the Zoning Board.
I am the third judge to whom this case has been assigned. This opinion must be read in conjunction with a prior partially dispositive ruling in the case, the summary judgment opinion of Judge Linares (DE 40), as well as other rulings by Judge Salas. I have built upon their work, and tried not to duplicate it. I broadly agree with those prior rulings, treated them as constituting the law of the case, and proceeded to resolve the issues that remain outstanding.
On April 30, 2013, and May 1, 2013, I held a bench trial to resolve disputed issues. The witnesses for both sides were offered as experts. By stipulation I accepted their reports or affidavits in lieu of direct testimony. In court, the opposing party was permitted to conduct cross-examination, and redirect examination was permitted as appropriate.1
*383“[I]n all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specifically and state separately its conclusions of law thereon_” Fed.R.Civ.P. 52(a). This constitutes the Court’s findings of fact and conclusions of law. I find that the Board’s denial effectively prohibits wireless service, that it was not supported by substantial evidence, and that it therefore violates the TCA and MLUL.
I.FINDINGS OF FACT
A. Parties and Jurisdiction
1. Plaintiff Sprint Spectrum L.P. is a Delaware limited partnership with a principal place of business at 6200 Sprint Parkway, Overland Park, Kansas. (Complaint, DE 1, ¶ 10).
2. Plaintiff T-Mobile Northeast LLC is a Delaware limited liability company and is the successor-in-interest to Omnipoint Communications, Inc. Both T-Mobile Northeast LLC and Omnipoint Communications, Inc., are wholly-owned subsidiaries of T-Mobile, USA, Inc., a Delaware corporation with its principal place of business in Bellevue, Washington. (Complaint ¶ 11).
3. Defendant Zoning Board of Adjustment of the Borough of Paramus, New Jersey, is a duly authorized zoning board of adjustment pursuant to N.J.S.A. 40:55D-69. As such, it is delegated the authority to, among other things, grant site plan approval and variance relief for wireless telecommunications facilities in Paramus. (Answer, DE 5, ¶ 12).
4. This Court has jurisdiction pursuant to 28 U.S.C. § 1331, which provides that “the district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”
5. This Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over Plaintiffs’ state law claim, which forms part of the same case or controversy as Plaintiffs’ federal claims.
B. Zoning Board Proceedings
6. Plaintiffs, the Carriers, are the proposed lessees of two properties located within the Borough of Paramus, New Jersey. One, the “Ambulance Corps” site, is located at 295 East Midland Avenue. The other, the “Church of the Nazarene” site, is located at 285 East Midland Avenue. Plaintiffs have sought approval to construct a wireless telecommunications facility at either of those sites in order to fill significant gaps in their wireless coverage. (Def. SMF, DE 60, ¶ 38).
7. In December 2004, Sprint filed its application for zoning approval to construct a 125-foot faux-tree wireless communications facility, known as a “monopole,” at the Ambulance Corps site. Paramus subsequently enacted a new telecommunications ordinance. The ordinance, among other things, specifically prohibited cellular monopoles (defined as “[a]n antenna structure consisting of a single pole”) in commercial and residential zones. (Karlebach Dep. at 8:1-4, 42:16-21). T-Mobile’s predecessor in interest, Omnipoint Communications, was added to that application in August 2008. The Ambulance Corps site is located in an R-100 residential zone. It is bordered by a Jewish Community Center, the Church of the Nazarene, and four residences. (Linares Opinion, DE 40, at 2).
8. In November 2007, to provide another option, Sprint and T-Mobile’s predecessor in interest, Omnipoint Communications, filed a joint application for zoning variances and approval to construct a 120-foot faux-tree wireless communica*384tions facility at the Church of the Nazarene site. That site, too, is located in an R-100 residential zone. It is bordered by the Paramus Volunteer Ambulance Corps, a commercial strip, and two residences. (Linares Opinion at 2-3).
9. Each application requested variances pursuant to N.J.S.A. 40:55D-70(d) with respect to (a) permitted use, because telecommunications facilities are specifically prohibited in residential zones, and (b) maximum building height, because 32 feet is the maximum height permitted. Both applications further requested variances pursuant N.J.S.A. 40:55D-70(e) with respect to (a) lighting, (b) minimum front/ rear setback, (c) minimum setback from a residential zone, and (d) minimum setback from property line for an equipment building. (Linares Opinion at 3).
10. Between May 26, 2005, and June 25, 2009, the Board held, seventeen public hearings on the Carriers’ applications. At these meetings, the Board heard testimony from counsel and various experts. It heard questions and concerns raised by the public. (Linares Opinion at 3-4). One of the issues raised was whether there was a feasible alternative to the monopole.
11. In May 2006, Rhoan Gordon, a radio frequency engineer and the Carriers’ expert before the Zoning Board, was asked whether affixing antennae to multiple shorter structures, such as lamp poles, would be a feasible alternative to the requested monopole. He responded:
Then you need a dozen of them or 15 of them to cover the entire thing at 25 feet ... That’s equivalent to the lamp pole, maybe 30 feet. You need a dozen to cover this gap.... That is not a feasible design even if we were to hang them on light bulbs [sic], you need a huge box with each antennae system where would you put it on the ground, hang it off the light pole and you have this huge cabinet or box of some sort hanging on your light pole and there would be a lot of them, in order to provide the coverage for all of the gap, or a large portion of the gap.... You need additional height for this facility.
(Linares Opinion at 6; Def. SMF ¶ 39).
12. Over two years later, in July 2008, a member of the public inquired as to whether a Distributed Antenna System (“DAS”) had been considered as an alternative to the proposed monopole. DAS is a means of providing wireless coverage without the use of tall monopoles. A monopole concentrates all wireless antennas onto a single tower, as the name suggests; a DAS, however, “distributes” those antennas across utility poles and other existing structures throughout the coverage area. (Linares Opinion at 6). The expert retained by the Board, Ross Sorci, a radio frequency engineer with twenty-nine years of relevant experience analyzing coverage and propagation issues, answered that, for a DAS, “[yjou’d have to run the — you’d have to have numerous antennas running up and down the road to get the same service that we could from a single structure.” Mr. Sorci further testified that “DAS systems typically aren’t used in this type of application, they are more of a, you know, spot solution, if you will, a parking garage, an auditorium, things of that nature.” According to Mr. Sorci, a DAS is “generally not very applicable to covering a large area like what we’re talking about here.” (Linares Opinion at 6; Pl. SMF ¶¶ 11.c, 14.a).
13. In November 2008, Paramus hired a public advocate, Patrick Papalia, who retained and offered David Maxson as an expert in “wireless consulting and communications.” Mr. Maxson described himself as a “municipal wireless consultant” with “experience in evaluating, observing and providing consulting services with regard *385to DAS systems and other types of wireless service systems.” Mr. Maxson testified that he does not hold a degree in engineering and that he has “no formal training with respect to the placement, construction or modification of personal wireless facilities.” He testified that he is not a licensed professional engineer in New Jersey, has no educational experience in land use planning, is not a certified urban planner, is not a certified municipal engineer in New Jersey, and has taken just one non-graded course via CD-ROM on cellular CDMA technology. He testified that he has, however, served as a consultant to municipalities for over 20 years and has advised wireless carriers regarding .both DAS and monopole technology, and that he is a “senior member of the Institute of Electrical and Electronics Engineers” and a “certified engineer with the Society of Broadcast Engineers.” The Board permitted Mr. Maxson to testify over the Carriers’ objection. (Linares Opinion at 6-7; Pl. SMF ¶¶ 11.d, 11.e).
14. Before testifying at the Board hearing, Mr. Maxson prepared a report in order to “raise questions that have not been addressed by the respective parties in the application proceedings,” including DAS. Mr. Maxson wrote that “[i]t must be understood that my review is incomplete without seeing the other materials that were referred to in the transcripts.” He further wrote that a DAS is an “alternative that deserves careful consideration” depending on “[w]hat local zoning regulation,” or “other local or state regulatory controls,” if any, “appl[y] to the use of the utility distribution infrastructure in Para-mus” because “[t]hese are important questions [that] speak directly to the availability of the utility distribution infrastructure as an alternative to the proposed tower facility.” (Pl. SMF ¶ 14.c).
15. Mr. Maxson testified that he had “enough information” to “come up with an alternate approach.... A distributed antenna system.” Mr. Maxson testified that he had “review[ed] the lay of the land” by looking “on Google,” where “you can see that the streets are well populated with utility poles and the density of development is pretty substantial.” He also “did some looking into the various addresses that were listed on the transcripts just to view Web sites, perhaps, see if I could see photographs -of the buildings on these different parcels, for instance, a church parcel.” And he “toured the region” the afternoon of the zoning board hearing. He did not review the drive test data that was performed by the Carriers or the coverage maps produced before the Board, did not conduct any drive tests in the area, and did not “even drive through the area” until the afternoon of the hearing, and that he did not conduct any inspection of the structural integrity of utility poles in the area to determine whether they would be structurally suitable to hold the antennas and the wires and the cabinets. (Pl. SMF ¶¶ 14.d, 14.e).
16. Mr. Maxson testified that that the streets of Paramus are “well populated with utility poles and the density of development is pretty substantial.” He continued:
So the simple observation from someone who has seen numerous DAS facilities, I’ve done coverage analysis of DAS antenna nodes, both on computer and in the field, is that as long as you have utility poles going through the neighborhoods, you have an opportunity to provide a coverage footprint wherever you need it. And, in fact, the testimony of Mr. Gordon early in the process was that it would take about 12, perhaps 15, *38630-foot high antennas to fill what they call the gap.
(Linares Opinion at 7).
17. Mr. Maxson agreed with Mr. Gordon that “with a DAS architecture using lower height antennas, you’d have to have numerous antennas up and down the road to get the same service that we could get from a single structure.” According to Mr. Maxson, “the use of numerous antennas on utility poles is a requirement for a DAS solution.” (Linares Opinion at 7-8).
18. In response to a question about how the Carriers would deal with an extended outage that could severely effect DAS service, Mr. Maxson testified that the Carriers could solve the problem if they “bring a small Honda generator- — I say Honda because they’re popular because they’re fairly small-packaged — set it on the street, chain it to the utility pole and plug it in for the duration of the power outage.” (Pl. SMF ¶ 14.g). Mr. Maxson also testified that a properly-designed DAS could locate an emergency caller within 100 feet and that the DAS cables are “quite rugged.” (Def. SMF ¶¶ 55, 58).
19. Plaintiffs’ expert, Glenn Pierson, a radio frequency engineer with a bachelor’s degree in electrical engineering and twenty years of network design experience, testified that he has “background, training or experience with respect to DAS systems or distributed antenna networks.” He has “designed a DAS network,” and has worked on the networks operating inside the U.S. Capitol building and the Continental Arena. (Linares Opinion at 8; Pl. SMF ¶ 11.b). Mr. Pierson reviewed Max-son’s report and testimony and concluded that “in my engineering opinion, [a DAS is] not a viable alternative in this situation.” (Pl. SMF ¶ 14.h).
20. Mr. Pierson testified as to the reliability of the DAS. Because DAS nodes are serially connected, if “you have a break, a tree falls down, ice storm, car hits a pole, takes it down, if it breaks the link, everything past there is gone. So, if you break a link, you could lose all of them.” He also testified that while “standard cell sites” have battery backups, he was not aware of any DAS nodes with battery backup. (Linares Opinion at 8).
21. Mr. Pierson testified that in a DAS network, the distribution of the signal means that triangulation of a user’s location is only accurate to a “thousand foot radius.” That implies, he testified, that first responders to an emergency “might be looking an awful long time” for the source of a user’s signal. (Linares Opinion at 8).
22. Mr. Pierson testified as to various maintenance and worker safety concerns associated with the DAS, particularly noting the potential for electromagnetic radiation exposure: “[I]f somebody has to work on that pole, they’re not allowed to be within 3 feet of that pole and still be within the workers Level 4 of the FCC required maximum permissible exposure.” That means that if “someone is going to go and work on one of these poles, you got to turn the node off.” To complete maintenance on the DAS itself, he explained, “you have to have a DAS provider do this. They have to be utility. The [Carrier is] not allowed to be on the pole. So, now you have a third party now to maintain it which may produce priority issues, delays in trying to get something up and running, depending how many carriers, how many systems they have.” (Linares Opinion at 8; Pl. SMF ¶ 14.i).
23. Mr. Pierson testified that DAS coverage requires additional “hand-offs.” He explained that with a DAS, “[y]our coverage is very small. You can zip in and zip out, very quickly. If the system can’t react in time to make that hand off, you’re *387going to drop it. The less time you go along, turn a corner, around a building, go into a clump of trees, it’s gone like that because the antennas are so low. It makes it very difficult.” (Pl. SMF ¶ 14.j).
24. Mr. Pierson testified that “capacity is not necessarily an issue with DAS. You can add channels to it.” However, Mr. Pierson testified that the DAS is more difficult to optimize for use by multiple carriers than the monopole design, because of its “omni antenna” architecture. Mr. Pierson also testified as to interference issues associated with the DAS, due to the close proximity of different carriers’ collocated antennae. For example, Mr. Pier-son testified that with a monopole, there can be a “10 foot separation between all [carriers]. So, so that we minimize or eliminate any possibility of between the carriers.... In the DAS ... [t]here are certain boxes where sometimes they put three or four boxes, we need three or four boxes. You can then split them up and put them on different poles but then you’re taking four or five poles that are up just to create one essential node for all carriers. So, that’s a balance with how many poles are you really going to use?” (Linares Opinion at 8-9; Pl. SMF ¶ 14.k).
25. Mr. Pierson further testified as to various technical problems associated with collocating multiple carriers on a single DAS node due to power and frequency constraints. He explained:
Again, it’s a power budget. It’s a frequency budget. One box can’t do it all. Okay. Because, you’ve got, Verizon has four frequency bands including the new 700. They have a lot of channels. If you try to stuff that into one box, you’re not going to have a lot. And, I don’t think there’s — -I haven’t found one box that’s going to cover, simultaneously, all the frequency bands.” Additionally, “you only have so much room for amplifiers in there. And, if you .start putting more and more amplifiers in there and then you got to go back to the whole EMF issue and find out if you’re still in compliance. Because, you might have 80 watts now, on a telephone pole, at 18 feet, 25 feet from, from a second story window, looking straight into it. So, that all has to be figured out. You may have to distribute them over multiple poles to do that which means there could be five or six poles in a row that all have equipment on it. And, then you have to, if you’re going to address battery backup, et cetera.... So, you’re looking at 3 to 4 feet on the pole you’re taking up. And, it starts below the lines.... Then, if you look at battery backup for a couple boxes, you’re looking at 3 feet a piece. By the time you start stringing this down the pole, it has to be on one side because the pole has to be climbable, as per the National Electrical Safety Code Regs. You could only put them on one side. You can’t wrap them.
(Linares Opinion at 9; Pl. SMF ¶ 14.m).
26. Mr. Pierson further testified that, to implement a DAS in Paramus, “you’re going to have one, at least one [node], in front of every five houses, one in front of every fifth house.” (Linares Opinion at 9; Pl. SMF ¶ 14.n). He concluded, “I don’t think [DAS is] a good solution for an area such as this in trying to get all the multiple providers and get something that’s reliable.” (Linares Opinion at 9).
27. On August 27, 2009, the Board issued a decision denying both of Plaintiffs’ applications. The Board found that “the substantial height of the proposed monopole and its placement within a residential neighborhood would have a detrimental visual effect on the surrounding properties,” that the Carriers “failed to investigate other less intrusive ways of providing coverage” and “did not put forth a good faith *388effort to explore and investigate alternative technology to provide coverage.” The Board concluded that “the requested variances would substantially impair the intent and purpose of the Paramus Zone Plan and Zoning Ordinance, as both proposed locations have been specifically designated by the Borough for residential use. The proposed use is prohibited.” The Board denied Plaintiffs’ applications because “Applicants have failed to meet their burden of showing that the benefits of the proposed improvements would substantially outweigh any possible detriment. The Board further finds that the Applicants have failed to demonstrate how the purposes of the MLUL would be advanced by this Application.” (Linares Opinion at 9-10).
C. This Action
28. Plaintiffs filed this lawsuit and sought summary judgment. On November 22, 2010, 2010 WL 4868218, Judge Linares issued an opinion that granted in part and denied in part their motion. (Linares Opinion, DE 40).
29. With respect to Plaintiffs’ ‘ claim that the Board’s denial constitutes an effective prohibition of wireless service, in violation of 47 U.S.C. § 332(c)(7)(B)(i)(II), Judge Linares found “that a significant gap in Plaintiffs’ wireless coverage exists within the area presented to the Board by Plaintiffs’ experts”; “that either . of Plaintiffs’ proposed [monopole] facilities would adequately fill the coverage gap”; and “that Plaintiffs adequately considered alternative sites before arriving at the proposed sites.” Judge Linares denied summary judgment, however, because he concluded that “genuine issues of material fact exist as to the feasibility of the DAS as a less intrusive alternative to Plaintiffs’ proposed monopole.” Judge Linares wrote:
While the testimony of the experts does shed light on the technical details associated with the DAS, it does not conclusively resolve the question of the feasibility of implementing DAS here, as the testimony regarding its relative reliability, safety, and other design considerations is conflicting, and the credibility of the witnesses as experts is in issue .... Thus, based on the evidence before the Court, the question of whether the DAS is a feasible, less intrusive alternative to the proposed monopole presents genuine issues of material fact.
(Linares Opinion at 21).
30.With respect to Plaintiffs’ claim that the Board’s denial is not supported by substantial evidence, in violation of 47 U.S.C. § 332(c)(7)(B)(iii), and is arbitrary and capricious, in violation of the New Jersey MLUL, N.J.S.A. 40:55D-1, et seq., Judge Linares found that “the Board’s decision provides only ‘generalized’ concerns regarding aesthetics, which are not supported by substantial evidence.” He also ruled that “there is no evidence in the record that the tower posed a realistic threat of collapse, and even if such a collapse were to occur, there is no evidence that it would fall onto or near residents’ homes,” and that “[t]he Board’s concerns regarding ‘ice accumulation’ are equally unfounded.” However, Judge Linares denied summary judgment because he concluded that “the determination of whether the Board’s findings here were supported by substantial evidence under § 332(c)(7)(B)(iii) and New Jersey law depends on the resolution of the same factual issues upon which the § 332(c)(7)(B)(i)(II) analysis depends,” specifically "“whether the DAS presented a feasible alternative to the monopole proposed by Plaintiffs.” Importantly, Judge Linares ruled that “if the DAS were not a feasible alternative to the monopole, a failure to ‘explore and investigate’ it as an alternative, less intru*389sive means of providing coverage would not constitute substantial evidence upon which the Board could have based its decision.” (Linares Opinion at 25-28).
31. Implementing Judge Linares’s decision, then-Magistrate Judge Esther Salas permitted, for purposes of comparison, discovery “related to the implementation of DAS either in Paramus or by Sprint or T-Mobile at one other site located within the jurisdiction of the Third Circuit.” The Carriers were able to identify two relevant sites within the Third Circuit, of which at least one used an outdoor DAS to provide wireless service. The Board elected to pursue discovery into T-Mobile’s use of a DAS in Newtown Square, Pennsylvania. (Pl. SMF ¶¶ 15.b, 15.c).
32. On July 20, 2011, the case was reassigned from Judge Linares to Judge Salas, who had recently been appointed a District Judge. Pursuant to an October 7, 2011 scheduling order, the parties submitted cross-motions for summary judgment. Judge Salas denied all motions in an opinion issued on May, 21, 2012. (Salas Opinion, DE 85).
33. With respect to Plaintiffs’ claim that the Board’s denial constitutes an effective prohibition of wireless service, in violation of 47 U.S.C. § 332(c)(7)(B)(i)(II), Judge Salas adhered to Judge Linares’s earlier rulings (a) “that a significant gap in coverage exists and either of Plaintiffs’ proposed facilities (a monopole at either site) would fill the coverage gap” and (b) “that Plaintiffs adequately considered alternative sites for the monopole.” Thus she considered only the remaining “narrow issue” of “whether Plaintiffs adequately considered technological alternatives to the monopole, i.e. the feasibility of a DAS as a less intrusive alternative.” Judge Salas denied summary judgment because “the reliability and intrusiveness of a DAS pose questions of fact not resolvable by summary judgment.” (Salas Opinion at 4-5).
34. With respect to Plaintiffs’ claim that the Board’s denial is not supported by substantial evidence, in violation of 47 U.S.C. § 332(c)(7)(B)(iii), and is arbitrary and capricious, in violation of the New Jersey Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., Judge Salas recognized that “Judge Linares previously reviewed the record presented to the Board and found an issue of fact existed.” She denied summary judgment to the Plaintiffs because she decided to “not disturb Judge Linares’s ruling.” (Salas Opinion at 6).
35. Judge Salas also denied the Board’s claim that granting the variance sought by Plaintiffs would be an impermissible “arrogation” of the legislature’s power. Judge Salas ruled that, because the Board did not rely on “arrogation as a reason for its denial of the variance applications,” it had waived the argument. (Salas Opinion at 7).
36. On August 1, 2012, the case was reassigned to me. (DE 92).
37. On September 12, 2012, Magistrate Judge Waldor issued an Order setting forth a schedule for expert discovery. Plaintiffs offered reports from Richard A. Conroy, Jr., and David Karlebach. The Board offered a report from Bruce A. Eisenstein. Depositions of Conroy and Eisenstein took place on December 5, 2012. The deposition of David Karlebach took place on December 17, 2012.
38. On April 30, 2013, I commenced a two day bench trial limited to the issue of whether, for filling the gap in wireless service, a DAS is a feasible, less intrusive alternative to the proposed monopole.
D. Findings Based on Trial Testimony and Exhibits
39. The bench trial consisted of testimony from three expert witnesses. As to *390the technological feasibility of a DAS, the trial amounted to a faceoff between Plaintiffs’ expert, Richard A. Conroy, Jr., and Defendant’s expert, Dr. Bruce A. Eisenstein. Plaintiffs also offered the testimony of David Karlebach, an expert who testified primarily as to planning and aesthetic matters. By agreement, each witness’s direct testimony was submitted in written form, and at trial, each witness acknowledged his written statement as. his direct testimony. Opposing counsel were then permitted to cross-examine, and live redirect examination was permitted as appropriate.
a. Feasibility of a DAS
40. Mr. Conroy gave an expert opinion as to whether a DAS network would offer a level of service comparable to that of the proposed macrocell system based on a monopole. On that issue he considered capacity, availability and reliability in the coverage gap area. He acknowledged that, setting aside some new material about the installation of solar panels on utility poles, he reached a similar opinion, based on similar facts, to that of Glen Pierson in the zoning board hearings. Conroy is well-credentialed and experienced in the design of monopole and DAS networks. (E.g., Conroy Direct at ¶¶ 1-20; Conroy Cross, 1T at 2-3).
41. Mr. Conroy established to the Court’s satisfaction that macrocell architecture is the industry standard method for providing outdoor wireless coverage. It can be deployed and maintained by wireless carriers, such as Sprint and T-Mobile. (Conroy Direct ¶ 21; Conroy Cross, 1T at 3).
42. Macrocell architecture provides broad and robust wireless coverage. With antennas mounted at levels higher than surrounding trees and buildings, a macro-cell is able to project a radio frequency signal that permeates the service area and provides generally reliable outdoor and in-building coverage. A standard macrocell facility offers secure and structurally sound equipment and antenna infrastructure. It permits diverse routing of back-haul, battery backup, and generator operation during long term power outages. (Conroy Direct ¶ 22).2
43. A DAS network constitutes a distinct network architecture, using different technology. It does not, like a macrocell tower, communicate directly and wirelessly with the cell phones from a relatively remote location. A DAS is in effect a partly wired, partly wireless network, with the wireless component confined to the last 600 to 900 feet. (Conroy Direct ¶ 24).
44. A DAS, as a hybrid wired/wireless network, thus requires a mesh of coaxial cable, twisted pair wires, and fiber-optic cables to connect all of the various end points or “nodes.” Building this network requires the stringing of cables or trenching to bury wired infrastructure. (Conroy Direct ¶ 24).
*39145. In a DAS network, the radio signal is converted to an optical signal, which is distributed to multiple antenna locations, or nodes, by fiber optic cable. (Conroy Direct ¶ 23). Each remote node requires equipment to convert the optical signal back to a radio signal, an amplifier to amplify the radio signal, and an antenna. Each node must be mounted on some structure and the antenna must be elevated. (Conroy Direct ¶ 24).
46. A DAS system is most typically used indoors — for example, in shopping malls, large office buildings, or conference centers — where traditional macrocells are unable to provide reliable coverage. (Con-roy Direct ¶ 25). It is commonly a spot solution, not a means of covering a large outdoor area. (Eisenstein Cross, 3T at 32-34).
47. Mr. Conroy testified convincingly that a DAS system has inherent limitations as to both coverage and reliability. While it is possible to implement a DAS outdoors, those inherent technical and operational limitations generally prevent it from being a feasible alternative to traditional macrocells. (Conroy Direct ¶ 25).
48. A DAS node located directly in front of a home in Paramus would provide “in-building” coverage to that home and approximately five others. There was disagreement as to the necessary number of nodes. It is essentially clear, however, that to fill the coverage gap in Paramus, a fairly dense multi-node DAS network would be required. (Conroy Direct ¶ 30; Conroy Cross, IT at 7; Eisenstein Direct ¶¶ 51-52, 54).3 The experts seemed to agree that a DAS would require hand-offs from coverage area to coverage area, because each node’s coverage area is small.
49. A significant portion of the coverage gap area in Paramus consists of residential streets with dense mature trees over eighty feet tall. The utility poles on which DAS nodes would be installed are thus at risk of damage from falling trees and power outages due to storms. (Con-roy Direct ¶ 31). A macro site uses a structurally sound equipment and antenna infrastructure that is relatively resistant to weather and other damage. A macro installation, too, may rely on utility poles for electrical power and “backhaul,” i.e., the transmission of the signal from the antenna back to the mobile switching center.
50. Both macrocell and DAS systems require backhaul, usually via fiber optic cable, which may be strung on utility poles or, where poles are lacking, buried in trenches. But a macro system will typically permit diverse routing of backhaul. Thus, it can permit the signal to be rerouted in response to, for example, the downing of a utility pole (although certain disruptions to backhaul, for example those occurring very near the monopole itself, can affect the system as a whole). DAS systems typically are not designed with diverse routing of backhaul, because the buildout would be impractical and expensive. And absent such diverse routing, a single utility pole failure could bring down a DAS system. (Conroy Cross, 1T at 4-5).
51. Either a monopole or a DAS system will of course be affected by a power failure. Either can use battery back-up, *392but in the case of the DAS each node must have its own. To ensure six to eight hours of backup, each node would have to be accessorized with one or two battery units, each weighing approximately 300 pounds and measuring 3' x 2' x 2'. A monopole may more practically operate on emergency electricity generators during long-term power outages. (Conroy Direct ¶¶ 31-32; Conroy Cross, 1T at 4; see also 2T at 6-8).
52. Dr. Eisenstein testified as an expert on behalf of the Defendant. Dr. Eisenstein, too, was well qualified as an expert. He is the Arthur J. Rowland Professor of electrical engineering at Drexel University. Although he has not designed a cellular network, he has dealt with advanced network design in his academic work. He has testified in 300 hearings, although the subject matter of the hearings was not broken down in categories. He has also consulted with some 70 municipalities on cellular network matters. (Eisenstein Direct ¶¶ 4-7; Eisenstein Cross, 2T at 80).
53. I was not persuaded by Dr. Eisenstein’s rebuttal of Mr. Conroy’s opinion that a DAS is less reliable than a monopole. Eisenstein testified, for example, that monopole systems and DAS systems both generally run backhaul along utility poles and thus would be equally subject to the danger of falling trees. (Eisenstein Direct ¶¶ 39-41). Evidence accepted by the Court, however, renders that comparison facile, because monopole systems may minimize this danger through diverse routing of backhaul.
54. On that issue, Dr. Eisenstein hypothesized that “qualified engineers” could design a DAS system with diverse routing of backhaul, perhaps using a “star” configuration, a technique taught “in our sophomore courses in network theory.” Asked if he knew of any such existing system, he replied “[n]ot directly.” In all caution, he conceded that, if designed, such a system might or might not be practical in the real world. (Eisenstein Cross, 2T at 92-93). That was not sufficient to convince me that a DAS system would be as reliable as a monopole system in terms of backhaul.
55. The evidence was not clear as to the feasibility of emergency backup of backhaul for a macro system via microwave transmission. Conroy testified that a macro cell system could, but a DAS system could not, use microwave transmission as an emergency backup for backhaul. (2T at 5-7). Dr. Eisenstein expressed doubts about the practicality of such a backup system, and made the valid point that neither he nor Conroy had identified any real-world example of it. (Eisenstein Cross, 2T at 95). I accept Dr. Eisenstein’s objection, and I do not rely on this evidence.
56. Dr. Eisenstein offered little to rebut the proposition that a macro cell site could use emergency power generation to withstand a power outage. He did not seem to dispute the point as a matter of engineering. He referred generally to the scarcity of power generators during Hurricane Sandy. (Eisenstein Cross, 2T at 95). That objection, apparently based on news reports, contained no specific information about whether Plaintiffs .have the capability to mobilize generators in an emergency.
57. Dr. Eisenstein suggested that a DAS system could withstand a power outage by means of battery back-up at the nodes. Again, this is not untrue, but it is perhaps oversimplified. Dr. Eisenstein offered generally that he could think of four ways, to design a reliable DAS backup, but admitted he knew of no existing DAS system that employed them. (Eisenstein Cross, 2T at 94). He opined, however, that “even losing one or two nodes might not [ajffect coverage because overlapping coverage from other nodes could pick up the slack.” (Eisenstein Direct ¶ 44). *393Again, this statement was not backed by concrete facts. The possibility that other nodes might pick up the slack under some circumstances is too unspecific to be persuasive.4
58. As noted above, a DAS network requires amplifiers and antennas (as well as battery backup enclosures, if installed) at each of its many nodes. Significant doubts, unresolved by Defendant’s evidence, remain as to whether there is adequate space for such equipment on the utility poles available in the coverage gap area. (Conroy Direct ¶ 58-54; Conroy Cross, 1T at 12).
59. One side of each pole must always remain climbable. Moreover, PSE & G is currently implementing a solar energy project, Solar4All, through which it is installing over 200,000 solar panel units on poles throughout its service territory, which includes all of Paramus and the service gap area. A DAS node cannot practically be deployed on a utility pole that has a solar panel unit. (Conroy Direct ¶ 53-54; Conroy Cross, 1T at 12).
60. Multiple carriers would generally require multiple nodes on a pole. Although sharing of, e.g., amplifiers or antennas is possible, on modern systems it would be impractical, or at least would limit service. (Conroy Cross, 1T at 13-14).
61. Neither Conroy nor Eisenstein conducted any inventory of available utility pole space. Neither could establish definitively whether there is sufficient pole space available to build a DAS system.5
62. Monopoles are much more flexible, although their space for multiple carriers is not unlimited. Five carriers can generally collocate on a monopole like the one proposed, but its height must ordinarily be extended approximately ten feet for each additional carrier. Depending on the tree line, the carrier at the lowest location might experience coverage problems. (Conroy Cross, 1T at 14).
63. Dr. Eisenstein testified in general, and to the Court it seems reasonable, that a DAS system would be more suitable for some environments than for others. For example, it could be tailored to work around obstructions in the terrain, and might work better in a small, densely populated area than in a large, rural one. (Eisenstein Cross, 2T at 97-98). In 2012, Dr. Eisenstein testified against the implementation of a DAS in the Township of Harding, New Jersey. There, Dr. Eisenstein testified that the areas in which a DAS “works okay” are “confined and narrow areas.” He stated that that where you “need 50, 60, 70 sites and some of those might have to be on 70, 80-foot poles in order to get above the tree line and to *394give you decent coverage .. [i]t just becomes impractical.” (PX-33, 103:5-21, March 29, 2012 Transcript, Township of Harding Zoning Board of Adjustment). To the extent this was inconsistent with Dr. Eisenstein’s opinion with respect to Paramus, that inconsistency was adequately explained by another factor: the installation in Harding involved coverage along a high-speed highway, Route 287, and a DAS system would involve rapid handoffs that might degrade the reliability of service. (Eisenstein Cross, 3T at 19-21).
64. In Essex Fells, New Jersey, Dr. Eisenstein testified that he “wouldn’t necessarily feel comfortable mounting a heavy piece of equipment [on existing utility poles] without getting at least a structural engineer to examine them.” (PX-8, 81:12-16, March 5, 2009 Transcript, Borough of Essex Fells Planning Board; see also Eisenstein Cross, 2T at 105-08). Challenged as to his contrary view regarding Para-mus, Dr. Eisenstein allowed that a structural engineer would have to do the necessary analysis. (Eisenstein Cross, 2T at 105-08).
65. Dr. Eisenstein favorably evaluated the feasibility of a DAS system for the Gladwyne section in the Township of Lower Merion, Pennsylvania. (Eisenstein Direct ¶ 24). He testified that he interviewed three DAS providers who each presented proposals to address the coverage gap in Gladwyne. The parties had done some preliminary work for the proposals, including assessing the availability of utility poles and other structures for DAS nodes. (Id. ¶ 24). Based on those proposals, Eisenstein reported to the Township’s Board that the DAS system was feasible. He testified that the Township implemented the system from one of the providers with positive results, and extended it to a larger area in Lower Merion than originally intended. (Eisenstein Redirect, 3T at 44-45). This testimony has limited value as to the feasibility of a DAS system in Paramus. Eisenstein’s involvement with the Lower Merion project ceased after he gave his report; he did not participate in selecting a proposal or deciding to extend the network. (Id.; Eisenstein Recross, 3T at 75-76). Furthermore, Eisenstein gave a general opinion in this case, without the benefit of concrete proposals from DAS providers, who largely declined to participate. (Id. at 45-46; infra at ¶¶ 68-69).
66. Discovery revealed that a DAS system in Newtown Square provides coverage that is designed to supplement the existing T-Mobile macro site located in the immediate vicinity of the corporate headquarters of SAP, America, Inc., and is primarily intended to ensure that commuters have coverage traveling on State Highway 252, Goshen Road, and certain feeder routes to these main thoroughfares located to the north and east of the intersection of these two roads. The coverage that the New-town Square DAS provides is largely confined to these commuter routes. The DAS was not intended to provide, and does not in fact provide, coverage to the residential area lying between Goshen Road to the south and State Highway 252 to the north (for example). (Plaintiffs’ Answer to Interrogatory 4). Thus it is of limited use as a comparison.
67. Dr. Eisenstein conceded that the Carriers, like himself, had conducted a “good faith analysis of whether or not DAS would be an alternative in Paramus.” (Eisenstein Recross, 3T at 67). His own analysis, Eisenstein acknowledged, was not, nor was it intended to be, “a design for a wireless network that could be built according to your specification of your design.” (Eisenstein Cross, 2T at 82). It was more of a conceptual opinion as to feasibility, which, in his view, necessarily incorpo*395rates the concept of reliability. (Id. at 85-87). Reliability, however, is a complex concept; it cannot be assessed in the abstract, but only in relation to a particular situation and design. (Id. at 88-89). Eisenstein’s opinion, then, was a more general and preliminary one, i.e., that he believed a comparably reliable DAS system could be designed. (Id. at 89).
68. Dr. Eisenstein testified that he did not ascertain whether any DAS provider would or could design such a system. He reported that none of the DAS providers he contacted was willing to risk “backlash” from the Plaintiffs. (Eisenstein Direct ¶57; see also Eisenstein Redirect, 3T at 46-47). To my mind, this somewhat weakened the basis for concluding that DAS was a feasible alternative.
69. At the hearing, the Defendant belatedly proffered DX-16, a letter from Crown Castle, one of the DAS contractors Dr. Eisenstein had contacted earlier. Although it was not previously part of the record, and was not considered by the experts in their reports, I permitted examination. I consider this letter to be a preliminary solicitation or proposal to install a DAS system, with battery backup and other features. It was not detailed, it did not propose a particular design, it fell far short of a firm proposal or commitment, and it was not accompanied by any expression of interest from a carrier. Assuming it was admitted in evidence, it would not affect my conclusions.
70. In sum, I find Mr. Conroy’s opinion the more persuasive, and I further find that Dr. Eisenstein did not refute Mr. Conroy’s account of the practical problems with a DAS. While Dr. Eisenstein showed that it is theoretically possible to provide coverage in the service gap area with a DAS, he did not establish that a DAS is an acceptable alternative means of providing the same level of robust, reliable coverage as a monopole under the prevailing conditions in Paramus.
b. Visual Impact and Intrusiveness
71. Mr. Karlebach, a licensed professional planner, presented his professional opinion that a single stealth tree-pole will be less intrusive and will have less visual impact than placing DAS equipment on utility poles. Defendant submitted Karle-bach to a relatively brief cross-examination, but did not present its own witness on these issues.
72. Karlebach described a faux tree design for the monopole facility. According to Karlebach, such a design attempts, insofar as is practical, to integrate with its environs, to conceal antennas, mounting hardware, cables, and conduits, and to occupy only a small sector of the field of vision in the service gap area. (Karlebach Direct ¶¶ 25-26). While no one would mistake the pole for an actual tree, it at least has the virtue of being confined to a single location.
73. A DAS, on the other hand, would not rise high above the ground, but would create its visual impact at multiple other locations dispersed throughout the service gap area. (Karlebach Direct ¶ 33). I add that, in each case, the DAS node would be located on a pole very near a private home.
74. The DAS network will require the placement of numerous cellular facilities throughout the gap to approximate the coverage from one macro facility. I accept Mr. Karlebach’s expert opinion that the proposed macro facility would therefore better satisfy Section 429-205(A) of the Paramus Zoning Ordinance, which states that one of the purposes of the Ordinance is to “[m]inimize the total number of cellular facilities throughout the Borough of Paramus.” (Karlebach Direct ¶ 38).
75. Mr. Karlebach also gave his expert opinion that the macro facility will better *396satisfy the purposes stated in Sections 429-205(A) and 429-212 of the Paramus Zoning Ordinance which “[s]trongly encourage the collocation” of carriers on wireless facilities” and provides that “[a]ll antennas and mounting equipment installed on buildings within the Borough of Par-amus shall be designed to have the least visual impact from all street rights-of-way and adjacent properties.” (Karlebach Direct ¶¶ 39-40).
76. Judge Linares has previously ruled that the Board’s generalized concerns regarding aesthetics and planning were not supported by substantial evidence. (Li-nares Opinion at pp. 23-27). The Board presented no substantial additional evidence on these questions at trial. On this basis alone, I would adhere to that earlier ruling.
77. Nevertheless, while determined to tread lightly in matters of aesthetic taste, I have reviewed the demonstrative exhibits depicting the proposed monopole. (E.g., 2T at 56-67 and Exs. A1 and A2.) Its proposed location, while in a residential zone and visible from a relatively larger number of residences, is physically close to only a limited number of residences. The DAS network would require additional boxes on utility poles near residents’ homes. While I do not find that the incremental intrusion would necessarily be severe, it does have the capacity to impact individual homeowners’ views and local streetscapes. In short, I do not identify a clear aesthetic winner.
78.I find that either alternative, the monopole system or the DAS system, would not unduly intrude on the aesthetic or planning values embodied in the Para-mus Zoning Ordinance. From a planning point of view, the monopole may have the edge in that it meets the criteria of collocation and minimizing the number of facilities. At any rate, I certainly cannot conclude that a DAS would be superior from an aesthetic and planning point of view.
II. CONCLUSIONS OF LAW
79. The Board’s zoning denial constitutes an effective prohibition of wireless service, in violation of 47 U.S.C. § 332(c)(7)(B)(i)(II). On this claim, prior proceedings left open one remaining factual question — “whether Plaintiffs adequately considered technological alternatives to the monopole, ie. the feasibility of a DAS as a less intrusive alternative.” (Salas Opinion at 4).6
80. The question before the Court requires consideration of whether a DAS is a comparable alternative to the proposed facility. That, in turn, implicates the service provided, the aesthetic effect, and its availability for immediate implementation. (Li-nares Opinion at 21-22, 27).
81. A DAS is not a feasible alternative because it will not offer comparable wireless service when measured against the coverage that can be provided by the proposed macro facility. A DAS has signifi*397cant reliability concerns associated with its deployment on utility poles, its small coverage areas per node, and its vulnerability to disruption.
82.The Carriers do not bear the burden of proving that every potential alternative, no matter how speculative, is unavailable. The proper inquiry for an effective prohibition claim is whether “a good faith effort has been made to identify and evaluate less intrusive alternatives, e.g., that the provider has considered less sensitive sites, alternative system designs, alternative tower designs, placement of antennae on existing structures, etc.” APT Pittsburgh Ltd. P’ship v. Penn Twp., 196 F.3d 469, 480 (3d Cir.1999) (emphasis added). That good faith analysis is apparent from the face of the record before the Board. Indeed, Dr. Eisenstein conceded" in a slightly different context that a good faith analysis is just what the Carriers have provided. (See Eisenstein Recross, 3T at 67).7
83. Therefore, judgment will be entered in the Carriers’ favor on this issue. The Board’s denial constitutes an effective prohibition of wireless service, in violation of 47 U.S.C. § 332(c)(7)(B)(i)(II).8
84. Section 332(c)(7)(B)(iii) requires that the decision of the Zoning Board be “in in writing and supported by substantial evidence contained in a written record.” 47 U.S.C. § 332(c)(7)(B)(iii). Substantial evidence means “such evidence as a reasonable mind might accept as adequate to support a conclusion.” Cellular Telephone Co. v. Zoning Bd. of Adjustment of the Borough of Ho-Ho-Kus, 197 F.3d 64, 71 (3d Cir.1999). The Court must examine the record as a whole to determine if there is substantial evidence to support the chal*398lenged decision. Id. The Court may not weigh the evidence contained in the record or substitute its own conclusions for those of the Board. I consider the record created before the Board, summarized above at ¶¶ 6-27.
85. Under New Jersey Law, a decision of a zoning board may be set aside only when it is “arbitrary, capricious, or unreasonable,” but “[s]o long as the power exists to- do the act complained of and there is substantial evidence to support it, the judicial branch of the government cannot interfere.” Medici v. BPR Co., 107 N.J. 1, 526 A.2d 109, 116 (1987). Thus, both the TCA and New Jersey law employ the substantial evidence standard. Cellular Telephone Co. v. Zoning Bd. of Adjustment of the Borough of Harrington Park, 90 F.Supp.2d 557, 563 n. 5 (D.N.J.2000).
86. Previous summary judgment rulings in this case have narrowed the inquiry such that “the question of whether the Board’s denial of Plaintiffs’ application was supported by substantial evidence turns on the resolution of genuine issues of material fact regarding the feasibility of the DAS as an alternative to the proposed monopole.” (Linares Opinion at 28).
87. I have examined the record of the Board’s proceedings, summarized above at ¶¶ 6-27. Although for this limited purpose I confine myself to the administrative record, I have implemented the earlier ruling of Judge Linares — i.e., I have considered the adequacy of that record in light of what I have learned from the expert testimony here about the nature of monopole and DAS networks. That expert testimony in this Court has educated me as to the technical issues, and in that way has influenced my conclusions as to the meaning of the evidence that the Board heard, as well as my conclusions as to what the presentation may have lacked.
88.I conclude that the Board’s conclusion was not supported by substantial evidence. That conclusion of law, although reached on a somewhat different basis, is consonant with the conclusion reached above that a DAS is not a feasible alternative to the. proposed monopole. And it necessitates judgment for the Carriers on substantial evidence review, and on the state law claims.
CONCLUSION
Based upon the findings of fact and conclusions of law set forth above, as well as prior decisions of the Court, this Court finds that the Board’s denial of Plaintiffs’ application to construct a wireless facility constitutes an effective prohibition of wireless service in violation of the federal TCA and is not supported by substantial evidence under the TCA and New Jersey’s MLUL.
. Certain record items, cited repeatedly, they will be abbreviated as follows:
DE = Numbered docket entry in this action.
PL SMF = Plaintiffs' Statement of Material Facts (DE 63).
Def. SMF = Defendant’s Statement of Material Facts (DE 60).
Conroy Direct = Direct Testimony of Richard A. Conroy, Jr. (DE 126-1, marked as Ex. C — 1).
Karlebach Direct = Direct Testimony of David Karlebach (DE 126-2, marked as Ex. C-2).
Eisenstein Direct = Direct Testimony of Dr. Bruce Eisenstein (DE 124, marked as Ex. C-3).
IT = Stipulated reconstructed transcript of hearing, 4/30/2013 [morning session] (DE 160-1) {see note below).
2T = Transcript of hearing, 4/30/2013 [afternoon session],
3T = Transcript of hearing, 5/1/2013.
Linares Opinion = Opinion dated November 22, 2010, by District Judge Jose L. Linares (DE 40).
Salas Opinion = Opinion dated May 21, 2012, by District Judge Esther Salas (DE 85).
Note regarding the reconstructed transcript cited as IT. As to one session (the morning of April 30, 2013), the transcription process failed. As a result, there was no transcript of most of the live examination of Richard Conroy, an expert witness for the plaintiffs. At the joint suggestion of the parties, and taking Rule 10(c), Fed. R.App. P., as my guide, I authorized counsel to reconstruct the transcript. They have done so, cooperatively and scrupulously. I apologize on behalf of the court, thank them, and commend their professionalism. Because the parties have stipulated to the content of the reconstructed testimony, there are no disputes about its accuracy for me to resolve. (DE 160, 160-1).
. I did not find the testimony to be conclusive one way or the other on an additional issue: the merits of a monopole or DAS system for triangulation of a user's position. Federal law imposes standards for locating E-911 (emergency or 911) callers. (Conroy Direct ¶ 36). Theoretically, three monopoles may offer triangulation or location capability. Likewise three DAS nodes. (Eisenstein Direct ¶¶ 28-38). Conroy enumerated various confounding factors for triangulation using a DAS network. (Conroy Direct ¶¶ 38-40). Conroy could not say, however, at what level of accuracy this proposed monopole, in relation to nearby monopoles, would triangulate callers' locations. (And all that one monopole can do alone is locate the signal within a 120-degree "pie slice” sector.) (Conroy Cross, 1T at 3-4). Much of this issue is mooted when handsets are equipped with GPS. (Conroy Cross, 1T at 9).
. Part of the discrepancy between the experts as to the required number of nodes might have involved a definitional issue. Conroy apparently envisioned a DAS system with multiple nodes that were simulcasting — reinforcing each other — on a single frequency. (Eisenstein Redirect, 3T at 39-41). Eisenstein testified that the necessity, or not, of simulcast nodes would have to be determined by on-the-spot testing in connection with the installation process. He seemingly conceived of simulcasting units collectively as a single node. (Id. at 41-42).
. This testimony may be somewhat in tension with Dr. Eisenstein’s testimony elsewhere that there should be as little overlap as possible in the coverage of nodes. (E.g., Eisenstein Cross, 2T at 27). Units that were simulcasting, on the other hand, might be placed more closely, and would not mutually interfere. (Eisenstein Redirect, 2T at 39). I do not rely on my own intuitions as to this technical issue, which was not explored by the qualified experts.
. Conroy expressed a number of other miscellaneous concerns about the availability of utility poles. Under the National Electrical Safety Code (“NESC”), for example, boxes could be mounted only at a limited range of heights. Some of the affected neighborhoods have underground lines, rather than poles. PSE & G and Verizon, too, might have to be persuaded to permit access to poles. (Conroy Direct ¶¶ 45-52). In my view, these concerns were somewhat generally expressed, and I therefore do not give them great weight. Eisenstein, for his part, suggested that the town simply put up as many additional poles as necessary, a suggestion that did not bring the discussion into sharper focus. (Eisenstein Direct 148).
. All other aspects of the effective prohibition claim were decided in the Carriers’ favor in Judge Linares's November 22, 2010 decision. He held that the Carriers (1) have significant gaps in their coverage and (2) exhaustively searched in vain for a less intrusive site. See Linares Opinion at 3-5, 13-20. In fact, the Carriers evaluated 27 alternate sites, including every site in the permitted MU zone. Id. at 5; PX-24 (10/11/2007 Tr.) at 25-27. They looked for collocation opportunities and considered whether they could serve the gap through a combination of lower-height facilities. PX-23 (12/7/2006 Tr.) at 12-13; PX-22 (9/14/2006 Tr.) at 8-13; PX-21 (5/11/2006 Tr.) at 52. In the end, even the Board's expert Ross Scorci agreed that there was no “viable alternative” to a facility at one of the proposed sites. Linares Opinion at 5. The sole question now, therefore, relates to the Carrier’s evaluation of DAS as an alternative. Id. at 22.
. Were I writing on a clean slate, I might rest this conclusion of law on the alternative ground that, because DAS is an alternative technology, as opposed to, say, an alternative site, any requirement for its implementation would likely be “preempted because [it] interfere^] with the federal government’s regulation of technical and operational aspects of wireless telecommunications technology, a field that is occupied by federal law.” N.Y. SMSA Ltd. P’ship v. Clarkstown, 612 F.3d 97, 105 (2d Cir.2010). This approach implies that a DAS would not constitute a legally "available” alternative under Section 332 because it is not a solution that the Board could require the Carriers to adopt. A DAS is a technological approach to the provision of wireless service, not a matter within the Board's competence to decide "zoning and land use matters.” Id. at 106-07. The expert testimony and reports here only confirm that there is a fundamental distinction between weighing competing technologies and deciding land use questions. Because the Board was presented with two sites, and the only alternative offered was not a site, but a technology, the Board’s denial of a variance may in practical terms have mandated that the Carriers use DAS to fill the coverage gap.
That, in my view, may exceed the proper function of a zoning board, and interfere with the implementation of federal law.
The preemption approach, however, was rejected by Judge Linares, who found that the Board's decision was not tantamount to mandating any particular technology. That decision remains the law of the case, to which I will adhere. See Linares Opinion at 21.
. As noted above, Judge Salas has already ruled on the Board’s claim that granting the variance sought by Plaintiffs would be impermissible “arrogation” of the legislature’s power. Judge Salas held that the Board could not advance “arrogation” as a defense because the Board did not rely on "arrogation as a reason for its denial of the variance applications,” and thus had waived the argument. The Board has not presented a valid justification for reconsidering that ruling. Even if I were to consider the Board’s arrogation defense on the merits, however, it would make no difference. There is no basis for reading the Borough's zoning ordinance as precluding the requested variance. And such a ban, if it existed, would plainly constitute an impermissible prohibition of wireless service under the TCA. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224469/ | MEMORANDUM
MALACHY E. MANNION, District Judge.
A trial on plaintiff police officer’s claim for interference with his First Amendment *400right to freedom of association resulted in a verdict against defendants for one dollar. The jury also awarded punitive damages in the amount of $15,000.00 against defendant Clifford Township supervisor Chris Marcho and $15,000.00 against defendant Clifford Township supervisor Dennis Knowlton. At the “Charge” conference, defendant objected to the charge for punitive damages. The court reserved its ruling on the objection to punitive damages until after a verdict was reached. At issue now is whether the award of punitive damages can stand. The parties have briefed the appropriateness of the punitive damages award. (Docs.76, 77). The court has thoroughly reviewed the evidence presented at trial and has determined that the award of punitive damages must be DISMISSED.
I. BACKGROUND
In this case, plaintiff Clifford Township police officer Donald Carroll brought several claims against Clifford Township and two of its township supervisors, Dennis Knowlton and Chris Marcho, pursuant to 42 U.S.C. § 1983. The third township supervisor, Barry Searle, commissioner of the township police force, was not a defendant in the case. Plaintiffs claims for First Amendment retaliation were disposed of at the summary judgment stage, leaving only one issue for trial — whether the defendants had violated plaintiffs First Amendment right to association by failing to sign his application to become a member of the Fraternal Order of Police (“FOP”), a union for police officers.
At trial, the evidence showed that the plaintiff presented an FOP .application form to the township supervisors in February 2012 after a township meeting. The application form has a space for an officer’s mayor or supervisor to confirm that the applicant is employed, has passed his civil service exam, and has completed his probationary period. The township supervisors indicated to plaintiff that they would forward the form to the township solicitor for advice regarding whether to sign it or not. In the meantime, about three months later in May of 2012, the township police department was entirely disbanded for financial reasons. As a result, plaintiffs FOP application was never signed. Prior to the time of the department’s disbandment, the supervisors had not received advice from their solicitor regarding whether they should sign the FOP application. (Tr. 52:14-17; OO^).1
Evidence was brought out at trial that plaintiff had given an FOP application to non-defendant supervisor Barry Searle, either at Searle’s home or in plaintiffs office, in March of 2011. Defendant Chris Marcho was not a supervisor at that time, and defendant Dennis Knowlton testified that he did not recall seeing the 2011 application. (Tr. 55:2-5). This is supported by Mr. Searle’s testimony that he did not bring the 2011 application to the attention of Mr. Knowlton, (Tr. 172:21-22), and the plaintiffs testimony that he did not present the 2011 application to Mr. Knowlton, but gave it to Mr. Searle so he could “bring it up at the agenda of the township meeting.” (Tr. 154-55). The plaintiff also testified that he had presented an FOP application to the Clifford Township supervisors in 2007. (Tr. 153-154). Neither Mr. Searle nor Mr. Marcho were supervisors in 2007, and although Mr. Knowlton was a supervisor, the plaintiff did not speak to Mr. Knowlton about his application in 2007. Instead, he dealt with another supervisor. (Tr. 154: 3-8).
Mr. Searle testified that he wanted to sign the February 2012 FOP application, *401but that Mr. Marcho and Mr. Knowlton “just wanted to make sure what the application meant.” (Tr. 184:7-13). Mr. Searle said that although the defendants did not respond to his requests to discuss the issue, he did not believe that they “didn’t want it,” rather that “they got too much else to worry about right now in their civilian jobs and they just haven’t gotten around to it.” (Tr. 184:7-20).
Mr. Marcho testified that he felt he had a “responsibility of this whole Township, and I believe whenever you sign your name to something, you are committing to something ... We didn’t understand what the commitment was.” (Tr. 40:19-24). He testified that he “paid very little attention to it. We were told that our attorney was going to look into it and find out if we really did need or have to sign it.” (Tr. 40-41). He stated that he did not sign the form at the March township meeting because “we were waiting for our attorney to come back with direction, and I don’t believe at that time he had an answer for us.” (Tr. 43:4-9). He also testified to not signing it in April, having just found out that the township had lost a lawsuit and being concerned about the attendant financial implications for the township. (Tr. 43:10-13).
Mr. Knowlton testified that he did not receive any type of training on constitutional rights from Clifford Township prior to 2012. (Tr. 53-54). He also testified, “You know, if you have to sign a paper that is going to affect the Township, if I don’t know what the paper is, I need a lawyer, yeah. I’m financially responsible. We were in financial trouble. I’m saying I just can’t go and sign anything.” When asked whether he had asked the solicitor about the status of the FOP form, he stated that there had been some talk about it, but that with the financial issues arising at the time, “it was just overwhelming and we didn’t get to that one.” (Tr. 61:7-14).
Both Mr. Knowlton and Mr. Marcho testified that they were aware of the existence of a First Amendment right to association. (Tr. 52:4-6; 54:3-6).
II. LEGAL STANDARD
“It is well established that there are procedural and substantive constitutional limitations” on punitive damage awards. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (citing Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001)). “The Due Process Clause of the Fourteenth Amendment prohibits the imposition of grossly excessive or arbitrary punishments on a tortfea-sor.” Id. The determination of whether or not there is sufficient evidence to support an award of punitive damages is a question of law. Alexander v. Riga, 208 F.3d 419, 430 (3d Cir.2000). “[T]he terms ‘malice’ and ‘reckless’ ultimately focus on the actor’s state of mind.” Id., at 431 (citing Kolstad v. American Dental Assoc., 527 U.S. 526, 119 S.Ct. 2118, 144 L.Ed.2d 494 (1999)). Punitive damages may be awarded in a § 1983 action when the defendant’s conduct is “shown to be motivated by evil motive or intent, or when it involves reckless or callous indifference to the federally protected rights of others.” Id., at 430-31. The Third Circuit’s view is that “punitive damages in general represent a limited remedy, to be reserved for special circumstances.” Michel v. Levinson, 437 Fed.Appx. 160, 164 (3d Cir.2011) (citing Savarese v. Agriss, 883 F.2d 1194, 1205 (3d Cir.1989)).
In evaluating the reasonableness of a punitive damages award, the Supreme Court has found the following factors to be relevant: “(1) the degree of reprehensibili*402ty of the defendant’s conduct; (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 and the civil penalties authorized or imposed in comparable cases.” Dee v. Borough of Dunmore, 474 Fed.Appx. 85, 89 (3d Cir.2012) (citing BMW of N. America., Inc. v. Gore, 517 U.S. 559, 575, 580, 583, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996)).
The degree of reprehensibility of a defendant’s conduct is the “most important indicium” of the constitutionality of a punitive damages award. Campbell, 538 U.S. 408, 419, 123 S.Ct. 1513 (2003). To determine the reprehensibility of conduct, a court considers “whether the harm caused was physical as opposed to economic; whether the defendant’s actions evinced indifference to or reckless disregard for the health or safety of others; the financial vulnerability of the victim; whether the conduct was repetitive or isolated; and whether the harm was the result of intentional malice, trickery, deceit, or mere accident.” Dee, 474 Fed.Appx., at 89 (citing Campbell, 538 U.S., at 419, 123 S.Ct. 1513).
III. DISCUSSION
As the uncontroverted evidence establishes that neither individual defendant was aware of the 2007 or 2011 FOP application requests, the sole issue here is whether defendants’ behavior regarding the 2012 FOP application justifies the award of punitive damages.
The degree of reprehensibility of the defendants’ conduct in the trial record is clearly insufficient, as a matter of law, to justify any imposition of punitive damages. A review of some of the relevant factors the court should consider in determining reprehensibility makes this clear. First, the jury determined that plaintiff did not suffer any-actual harm as a result of the events in this case. (Doc. 69). Moreover, while plaintiff submitted three FOP applications to Clifford Township over the years, only one of the applications was presented to the individual defendants in this case. This single presentation to the individual defendants is best described as an isolated incident. Additionally, there is no evidence that the failure to sign the FOP form was the result of intentional malice, trickery, or deceit.
The trial record is completely devoid of evidence that Mr. Marcho and Mr. Knowl-ton were acting with intentional malice. Plaintiffs counsel claims that she showed Mr. Marcho’s evil motive at trial during the following cross examination of non-defendant supervisor Barry Searle:
Q. Well, isn’t it true that Mr. Marcho was after Donny Carroll? He complained the first meeting that he was supervisor about him? [Overruled objection]
A. I wouldn’t characterize it as being after Officer Carroll. Mr. Marcho had received complaints from some citizens, but he was a new supervisor, and I wouldn’t characterize it as being after him.
Q. But Mr. Marcho had complained about Donny and his police work, correct?
A. I think I would characterize it more that he raised questions, because, again, he was new and, you know, he got calls from citizens in the township. He would be saying, you know, what was the story?
(Tr. 181-82). This testimony is not only insufficient to show evil motive, but, to the contrary, it displays Mr. Marcho’s apparent good faith attempt to carry out his responsibilities when confronted by citi*403zens’ complaints. While this exchange may have been a questionable attempt by plaintiffs counsel to suggest the answer she wanted, her questions, of course, are not evidence. Further, Mr. Searle’s answers clearly reject her suggestions. And, finally, even if this testimony demonstrated that there was a conflict between Mr. Marcho and plaintiff over plaintiffs job performance, it in no way establishes that Mr. Marcho acted with a reckless or malicious state of mind in waiting to hear from the township’s solicitor before signing the plaintiffs FOP application.
Plaintiff repeatedly argues that the individual defendants here “refused to sign” the FOP application, and that these refusals are evidence of malice or recklessness. The trial record does not support that any such “refusal” occurred. There is a total dearth of evidence that Mr. Knowlton or Mr.' Marcho ever told the plaintiff that they would not sign the FOP application, or that they disapproved of his attempt to associate with the FOP. There is not even evidence in the trial record that the individual defendants ever made an affirmative decision not to sign the application. Plaintiff even agreed that at the time he submitted the FOP application, “the supervisors advised [him] that they had to look into it and give it to their solicitor,” and that “they indicated ... that it was probably a good thing and they were positive about it.” (Tr. 157:10-16).
Moreover, the plaintiffs late February 2012 e-mail inquiry to Mr. Searle regarding the status of that FOP application reflected that the supervisors had not yet heard back from their solicitor, and that was why there had not yet been a decision on whether to sign the form. (Tr. 157-58). Thus, even the plaintiffs own testimony does not demonstrate that he was ever told that the Clifford Township supervisors refused to sign his form, or that a decision had been made that they would not sign the form. All that the evidence supports is that the supervisors were awaiting for a response from their solicitor during a financially tumultuous period in the township. This does not demonstrate malice, and does not justify the imposition of punitive damages.
Plaintiff also argues that the individual defendants’ “refusal to even discuss” the FOP application is evidence of malice and recklessness. While Mr. Searle’s testimony does reflect that the individual defendants did not respond to his requests to discuss the FOP application, (Tr. 184:14-16), plaintiffs e-mailed inquiry and Mr. Searle’s response also show that at that time, the Clifford Township supervisors had not yet received advice from their solicitor regarding the FOP application. Mr. Searle also testified that he was “quite sure whatever counsel came back and told them to do, we would have done.” (Tr. 75-76). Again, nothing in this testimony indicates that there was any malice, intent to harm, deceit, or recklessness at play on the part of the individual defendants.
Citing Alexander, the plaintiff correctly notes that knowledge that one may be acting in violation of federal law is relevant to whether punitive damages are appropriate. While the evidence at trial may have shown that Mr. Marcho and Mr. Knowlton knew about the existence of the right to freedom of association as a general matter, it did not show that they had any knowledge that their delay in acting, or even their failure to act while waiting for the advice of counsel, was potentially in violation of federal law. See Alexander, 208 F.3d, at 431. Additionally, there is nothing to suggest that the referral to the attorney was undertaken in a malicious attempt to harm plaintiff or with reckless disregard to his rights,
*404Along the same vein, the plaintiff contends that the FOP application was so simple that giving it to a solicitor for advice on the proper course of action is evidence of malicious intent or recklessness. However, there is simply nothing in the trial record to support that Mr. Marcho or Mr. Knowlton understood the possible consequences of signing or not signing the form, and certainly nothing to demonstrate that they were aware that asking their solicitor to give them advice, prior to signing on behalf of the township, could have an affect on the plaintiffs constitutional rights. There clearly was insufficient evidence presented that Mr. Knowlton or Mr. Marcho had knowledge of the law surrounding the First Amendment right of association to justify punitive damages.
Unlike other cases where the Third Cir-. cuit has upheld punitive damages awards because of “intentional disparate treatment,” “retaliation,” or other “callous, intentional, or malicious conduct,” this case does not present evidence that defendants intentionally harmed plaintiff or were reckless with his constitutional rights. See Dee, 474 Fed.Appx, at 89 (citing Feldman v. Phila. Housing Auth., 48 F.3d 823, 834 (3d Cir.1994); Springer v. Henry, 435 F.3d 268, 282 (3d Cir.2006)). There is simply no basis for an award of punitive damages, and therefore the punitive damages awards will be DISMISSED.
IY. CONCLUSION
For the foregoing reasons, the award of punitive damages in the amount of $15,000.00 against Dennis Knowlton will be DISMISSED. The award of punitive damages in the amount of $15,000.00 against Chris Marcho will be DISMISSED. The Clerk is directed to enter judgment for plaintiff Donald Carroll in the amount of $1.00. A separate order shall issue.
ORDER
In light of the memorandum issued this same day, the award of punitive damages in the amount of $15,000.00 against Dennis Knowlton will be DISMISSED. The award of punitive damages in the amount of $15,000.00 against Chris Marcho will be DISMISSED. The Clerk is directed to enter judgment for plaintiff Donald Carroll in the amount of $1.00.
. The trial transcript can be found at Doc. 74 and Doc. 75. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219008/ | PATTERSON, District Judge.
The bankrupt in 1931 made an offer of composition. Several creditors opposed, alleging that credit had been obtained on false financial statements. After considerable testimony bearing on the issues had been taken, a stipulation was entered into by the bank-rapt and the objecting creditors permitting the bankrupt to withdraw the offer. On November 18,1931, an order was entered on the stipulation, directing that the offer be deemed withdrawn, and the composition proceeding came to an end. Over a year later the bankrupt makes a new offer of composition. This offer is resisted by the same creditors. The referee has found that at the time when the bankrupt withdrew its initial offer it expressly agreed with the opposing creditors that it would not again offer a composition, and he recommends that for this reason the proceeding should be dismissed.
One of the conditions precedent to confirmation of a composition is that it satisfactorily appear to the court that the offer made is “in good faith.” Bankruptcy Act § 12, 11 USCA § 30. It would seem clear that an offer of composition is not made in good faith when it is in the teeth of an express agreement by the bankrupt not to make such an offer, the agreement having been made when the bankrupt was permitted by the opposing creditors to withdraw a prior offer.
Confirmation of the proposed composition will accordingly be denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219009/ | HOLMES, District Judge.
The plaintiff seeks to enjoin the.state’s administrative officers from assessing its real and personal property for ad valorem taxes for the years 1927 to 1931, inclusive. It alleges a contractual right or grant of exemption of its conduit and pipe lines, pumping plants, and other property used by it in the transportation and distribution of natural gas.
This court has general jurisdiction (a) because the controversy, which is of the requisite amount, is wholly between citizens of different states; and (b) because the plaintiff alleges in good faith and upon reasonable grounds that the state is attempting to violate a contractual obligation which, under the Federal Constitution (art. 1, § 10) cannot be impaired. It has jurisdiction as a court of equity:
First, because in this instance “the attempted enforcement of a tax upon property which has been exempted by proper legislative authority from the burdens of taxation, constitutes a grievance of so irreparable a nature as to merit preventive relief by injunction.” High on Injunctions (4th Ed.) p. 504, § 530; Osborn v. Bank, 9 Wheat. 739, 6 L. Ed. 204; Fargo v. Hart, 193 U. S. 502, 24 S. Ct. 498, 48 L. Ed. 766; City of Dallas v. Higginbotham-Bailey-Logan Co. (C. C. A. 5) 37 F.(2d) 513; Board of Assessors v. Pullman’s Palace-Car Co. (C. C. A. 5) 60 F. 37.
Second, because the exemption covering realty and the tax being a lien thereon, the threatened action of defendants (which it is agreed will be carried into execution unless restrained) will east a cloud upon plaintiff’s title which only a court of equity is able to prevent or dispel. Hughes, Federal Practice, c. 15, § 1103, p. 307; Wilson v. Lambert, 168 U. S. 612, 18 S. Ct. 217, 42 L. Ed. 600; Dows v. Chicago, 11 Wall. 110, 20 L. Ed. 65; Ohio River, etc., Co. v. Dittey, 232 U. S. 587, 34 S. Ct. 372, 58 L. Ed. 737.
Other grounds of equitable relief are relied upon by the plaintiff; but it is unnecessary to enumerate or pass upon them, as the *698combination of the two above mentioned seems to the court to be sufficient.
On the merits, the defendants assert that the exemption is void upon three main grounds:
First, the plaintiff is a foreign corporation.
Second, it is not a new enterprise of public utility.
Third, its property is not used for distribution.
There is nothing in the state Constitution which forbids the grant to foreign corporations of the exemption here assailed. The defendants contend that the exception in section 182 of the Constitution of 1890 applies to domestic corporations only. The section is as follows: “Section 182. The power to tax corporations and their property shall never be surrendered or abridged by any' contract or grant to which the state or any political subdivision thereof may be a party, except that the legislature may grant exemption from taxation in the encouragement of manufactures and other new enterprises of public utility extending for a period not exceeding five years, the time of such exemptions to commence from date of charter, if to a corporation; and if to an individual enterprise, then from the commencement of work; but when the legislature grants such exemptions for a period of five years or less, it shall be done by general laws, which shall distinctly enumerate the classes of manufactures and other new enterprises of public utility entitled to such exemptions, and shall prescribe the mode and manner in which the right to such exemptions shall be determined.”
If the defendants’ contention be true, then this entire section applies to domestic corporations only, and there is no applicable limitation on the legislative power as to foreign corporations, other than section 181 of the same Constitution, which says: “The property of all private corporations for pecuniary gain shall be taxed in the same way and to the same extent as the property of individuals.” Construing the two sections together, we conclude that exemptions granted to domestic corporations must commence “from date of charter,” and to individuals or foreign corporations, from “the commencement of work.” In any event, we find the Legislature free to grant to foreign corporations the exemption here asserted, provided only individuals are “taxed in the same way and to the same extent,” which is true of the legislation now under consideration.
The problem then before the court is whether the Legislature intended to include foreign corporations in its,enactments granting “exemption from taxation in the encouragement of manufactures and other new enterprises of public utility.” Chapter 138, Laws Miss. 1922; chapter 172, Laws Miss. 1926. If a primary purpose of the legislation was to induce outside capital to come into the state, we can think of no sound reason why the lawmakers would desire to exclude foreign corporations. In Robertson, State Revenue Agent, v. Mississippi Packing Co., 134 Miss. 837, 98 So. 539, 540, the state revenue agent sought to assess a Virginia corporation before a five-year period of exemption (to which it had succeeded) had expired. The Supreme Court of Mississippi held the Virginia corporation entitled to enjoy the exemption. It said:
“It is not who the owners are or have been. Nor whether the operation of the business has ceased and begun again. We hold that appellee’s plant in the sense of the statute was established on February 21,1910-, the date of the charter of the Natehez Packing Company.
“The Natehez Packing Company was entitled to the exemption from the date of its charter, February 21,1910', for a period of 5 years, which therefore ended on February 21, 1915, and appellee, as the owner of the plant, is entitled to the benefit of that exemption up to the latter date. From the expiration of that exemption, appellee’s property was subject to taxes as other property in Adams county.”
This ease was under a prior statute, giving similar exemptions, and the act in question was re-enacted in the light thereof. While the question of foreign incorporation was not discussed, it was mentioned by the court in its opinion, and the exemption was actually allowed to a foreign corporation. See, also, Equitable Finance Co. v. Lee County, 146 Miss. 734, 111 So. 871; Adams County v. National Box Co., 125 Miss. 598, 88 So. 168; LeBlanc v. I. C. R. Co., 72 Miss. 669, 18 So. 381. We therefore conclude that the exemption claimed by the plaintiff should not be denied merely because it is a foreign corporation.
It is next contended that the plaintiff is not “a new enterprise of public utility” within the meaning of section 182 of the Constitution and subsequent legislation in pursuance of the authority therein expressly grant*699ed. It is conceded that the plaintiff is not a public service corporation, as it does not sell or distribute gas to the public at large. According to a technical and more restricted use of the phrase, it is not “a public utility”; but at the time the exemption was granted it was a new enterprise of public utility within the meaning of said section 182, and there is no reason to think that the Legislature used the words in any narrower sense than was intended by the framers of the Constitution.
It is argued by the defendants that the word “other” should be stricken from section 181 as a palpably erroneous use of language. Counsel say in their brief:
“The word ‘other’ has no place in the following quoted sentence:
“ ‘Manufactures and other new enterprises of public utility,’ and this clause should be read with the word ‘other’ dropped out and as though it had never been written into the Constitution, because it does not make sense and only leads to conflict and confusion in an attempt to construe the section.
“In using the language ‘manufactures and -other new enterprises of public utility’ it is so plain and apparent, as to admit of no argument, that the framers of the constitution inadvertently and through mistake and error used the word ‘other.’ This word can have no proper place in the constitution because, as stated, it does not make sense. A manufacture is in no sense a ‘public utility,’ and the two are not the same kind and character of enterprise.”
We do not feel justified in thus eliminating from the fundamental law a word which gives coherence of discourse to the subject, because, in the first place, it is a canon of construction to treat nothing as surplusage but to ascribe some meaning to every word and clause in the Constitution of a state, and, in the second place, such license of construction would not dispel an ambiguity, but create one. The exemption was intended to encourage “manufactures and other new enterprises of public utility.” A factory is not a public utility in a restricted sense, but it is in the generic and ordinary use of the word. Being serviceable and ordinarily profitable, it is an enterprise of utility. The Century Dictionary defines “utility” as follows: “Usefulness, serviceableness, profit. The character of being useful, usefulness; profitableness; the state of being serviceable or conducive to some desirable or valuable end.” C'ye. defines “utility” as: “The state or quality of being useful; usefulness; production of goods; advantageousness; profitableness; benefit; service; profit; avail.”
The plaintiff was organized and sought exemptions for its pipe lines and pumping plants to be used for the transportation and distribution of natural gas. It was a new enterprise, the first of its kind in the state. Crossing the Mississippi river from the Monroe gas fields, it involved physical hazards for labor and financial hazards for capital. It resulted in the expenditure within the state of about two millions of dollars, and placed on the assessment rolls, after the period of exemption had expired, a valuation exceeding one million. It sells natural gas within this state to a public service corporation, to a consolidated school, and to an individual retailer thereof. It was an enterprise which looked to desirable and valuable ends, turning factory wheels, heating furnaces, shops, offices, and homes, and lightening the labors of men and women everywhere the product is brought into use. Under the facts, the plaintiff, as defined by the Constitution of 1890, is an enterprise of public utility, just as many factories are, although privately owned, operated for private profit, and not dedicated to a public use; that is, not a public utility in a technical sense.
The third contention of attorneys for defendants is that plaintiff’s property is not used for distribution of natural gas. Attorneys for plaintiff in reply contend: First, that the law clearly exempts from taxation “all conduit and pipe lines,” without further qualification; second, that there is a comma placed after “all conduit and pipe lines,” and that there is no comma after “appliances” where the qualifying phrase begins; third, that the word “and” should be read “or” between the words “transportation and distribution.” But it is not necessary for us to construe the act with such precision at this time, because, regardless of whether “all conduits and pipe lines” are qualified by the phrase requiring distribution of natural gas or not, we are satisfied that the plaintiff is engaged “in the transportation and distribution” of natural gas as a wholesale distributor, and that the statute does not limit grants of exemption to distribution to the ultimate consumer. Any “transportation and distribution” within the state is sufficient to obtain the exemption if the other requisites are present.
The temporary injunction heretofore issued, restraining the defendants from assessing plaintiff’s property described in the bill, should be made final, and a decree may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219011/ | TUTTLE, District Judge.
This is an equity suit involving re-issued patent No. 18374 to W. Shurtleff of March 1, 1932. It has to do with unit heating and ventilating structures. As usual, the bill alleges title validity and infringement, and, as usual, the defendant pleads invalidity and noninfringement. There are other defenses. The reissue feature presents unusual problems which might be considered, but I accept the patent in the form in which it was reissued, with the presumption of validity surrounding it.
There is the somewhat unusual defense as to whether or not Shurtleff was the man who really made the invention, or whether a letter received by his company prior to the application and about the time he claims to have conceived the invention was the real source of his claimed discovery. There are many things which indicate that the germ of the idea came from that letter. The memory of men as to dates is likely to err unless fixed by written records. All there is here in writing to show that the idea in Shurtleff’s mind came in advance of the letter is the figure “9” where the date is written on the drawing as “9-14-22.” If that date were 10-14-22, it would be after the letter. The drawing and the date are in pencil. The letter which was received by Shurtleff’s company told the whole story later told in the application filed by Shurtleff so far as anything is involved of importance sjn this art. The information given in that letter comes nearer to describing what is now being used successfully in the art than is told by the patent in suit. It is-unpleasant to discuss the memory and veracity of witnesses. It is not necessary to do that in order to decide this ease. This much is certain, that the author of the letter did not get his ideas from Shurtleff. The letter suggests how natural and easy it was to place a so-called light-weight radiator in the unit construction, if one wanted to make the structure lighter and smaller. The British patent to Raw, No. 12340, dated June 13, 1899, explains how these lightweight radiators could be used in this art. To the same effect are the British patents to Masquet, No. 17085 of August 8, 1898, Stott No. 26795 of 1896, and Lake No. 14090 of 1901. The letter above referred to tells how the tubes or pipes could be made of copper. Those copper tubes, either cylindrical or wedge shape, with fins, seem to serve the purpose in the most satisfactory manner.
If the patent were to have value and breadth worth-while, it would be for a radiator of light weight as compared with east iron, with a fan below the radiator, an intake for air from the outside below the radiator, a passageway for cold air around the radiator, a passagewayfor air through the radiator so that it could be heated, and a discharge for the air vertically and at high velocity to the ceiling of the room. In defining the radiator as one element of the combination, Shurtleff uses comparative language describing it as “relatively light.” In the same way as to dimensions, he uses comparative words which can only have meaning when some old use is read into the claim. The court is urged to read into the claims the meaning that the radiator is lighter than the old east-iron radiators, and that it is of smaller dimensions than the old cast-iron radiators. This use of words in a patent is to be condemned. I criticized a similar use in the balloon tire case. Steel Wheel Corporation v. B. F. Goodrich Rubber Company (D.C.) 27 F.(2d) 427. In order to construe a claim worded in such a manner, it is necessary to go back to the old art, not only for the purpose of determining validity, but, if the claim should be sustained, it would be necessary to go back to the old art and reinterpret the claim every time the question of infringement was involved. Those relative words, like “larger,” “smaller,” “lighter,” “heavier,” “thicker,” and “thinner,” are poor words to use in claims when the improvement claimed rests entirely upon the size or weight of the element in combination. A certain element in the old combination might be made very thick and heavy. If the practice of using comparative words is to be approved, a patent might claim the same combination except to make the one element thinner and lighter. Then along might come another inventor who could get a patent because he made that particular element still thinner and still lighter than the first. For the purpose of this discussion, I am now assuming that each new substitution of a thinner and lighter element did result in a new use and result. If the first one could get a patent by making the element relatively thinner and lighter, then the second applicant would be able to get his patent by psing exactly -the same language and simply saying that it was relatively thinner and lighter. In other words, we should have two patents in the same art, with claims in each reading exactly the same as to every word and every letter. If each reduction in size and weight as compared with the art at the date of the application had produced sufficient improvement, then there would be no more reason for denying the second patent than there *705would for denying the first one. While I do not dispose of this ease on the ground that the claims are indefinite, I do not wish to be understood as holding that particular defense without merit.
I disagree with the contention made by plaintiff to the effect that high velocity'vertical discharge of air in a unit heating and ventilating system is an art all by itself, that the central heating and ventilating system is another art, and that the unit system of heating other than high velocity vertical discharge is a third art. This word “art” in the patent law has often been used in a way to confuse. We speak of the automobile art, the aeroplane art, the motorboat art, and the gasoline engine art. The gas engine art runs crosswise of the automobile art, the aeroplane art, and the motorboat art. These four so-called arts have very much in common, and in many eases it would be fairer to talk about the transportation art. To take something having to do with the gas engine of the automobile and use it in the gas engine of the motorboat is not a new use in a new art. Both uses were in the gas engine art. If the chancellor attempts to pi ark the boundaries of the various so-called arts by fixed lines, like the fences which surround a farm, and then grants a patent to any improvement which uses something from outside that little field, he is going to reach some result very unfair to the business man and the mechanic. It is the duty of the chancellor to weigh the thing done and the results produced. Some things are very difficult to find, although very near, and easy to see when others have pointed to them. We have difficulty in seeing the partridge which skulks near our feet. On the other hand, it may be a long way to the polar bear in the zoo, but any school boy can find the polar bear in the zoo. Columbus discovered a continent; nobody coming after him could discover that continent. It was left for De Soto to make inroads and discover the Mississippi river; others who came still later crossed the temperate zone with roads until it was impossible to discover anything more on the surface of the earth, and now they are looking for the hidden things, like oil and coal. The plaintiff would limit this art to such an extent that, if Shurtleff took something from a heating system found in a room adjoining the schoolroom to be heated, then he should be given credit for a new use. The fact that Shurtleff found a structure in the next room, blowing its air out into the schoolroom where the children were located, does not mean that he found it in a different art. It was in the same heating and ventilating art. It was not much more difficult for him to find it in the room adjoining the schoolroom where it was located with its nose stuck through the wall, blowing air into the schoolroom, than it would have been if it had been located in the schoolroom. It is a matter of being practical and a matter of doing justice to look into these things and decide whether they are the kind of things which would occur to any ordinary mechanic, or whether, on the other hand, it requires the genius of an inventor to discover them. The man who finds an oil well in a wildcat field discovers something, but the man who drills an offset well in a field where there are already many other wells is not a discoverer — he is a well digger.
This patent is not for a new combination. Herman Nelson Corporation of Moline, Ill. v. Columbus Heating & Ventilating Co., 11 F.(2d) 273 (C. C. A. 6); Buckeye Blower Co. v. Arensmeyer, Warnock & Zahrndt, 35 F.(2d) 733 (C. C. A. 2); Callahan v. Nesbitt, 1 F.(2d) 75 (C. C. A. 3). It is difficult to tell from reading the patent just exactly what Shurtleff finally decided to claim. That difficulty results from the fact that Shurtleff, when he made his application, did not have any correct idea as to what was old. So far as he thought out his own elaims, they were entirely old in the art. Some of our most helpful inventors are those educated in the shops, but Shurtleff was lacking in understanding of the art in which he worked. The world to him was the piano-type heater and ventilator being made in the shop where he worked, and the things he thought he had discovered and invented were all old. He took an old automobile radiator and arranged it so that a fan could blow air through it. He did not pass steam or hot water through the radiator. In other words, he did not make an operative device before he applied for his patent. It was well known in the art that a radiator which could be used in the automobile art to cool the water within the radiator could be used in the heating art to heat the surrounding air. It was also well known that to increase heating surface would increase the capacity for heating. -This was so well known that it was largely a matter of mathematics. Shurtleff was working on the wrong theory because he thought that in order to heat air successfully it was necessary to have resistance in the air current. When he made his so-called invention, he was attempting to get resistance in his hot-air current. His patent as well as his testimony discloses this desire. He was in error in this notion. What he claimed as an advántage was a misfortune to the art.
*706It is true that a smaller unit was desired. That desire is still with us. A heating unit which would properly heat and ventilate a room without occupying more space than the lady’s thimble would be still more desirable than what we now have. Bigness is not a thing to be desired in heaters and ventilators. It is not a matter of taste, but just a'matter of common sense. They are not purchased for the purpose of mailing the schoolroom more beautiful or for the purpose of making the aisles narrower. If the results could be accomplished as satisfactorily without having the thing in the room, it would be better. Every schoolboy who bumps his head against one of these units is still wishing it were smaller. It is not invention to make something smaller and lighter. Hill v. Wooster, 132 U. S. 693, 10 S. Ct. 228, 33 L. Ed. 502; American Road-Mach. Co. v. Pennock, 164 U. S. 26, 17 S. Ct. 1, 41 L. Ed. 337; Kilbourne v. W. Bingham, 50 F. 697 (C. C. A. 6); Strom Mfg. Co. v. Weir Frog Co., 83 F. 170 (C. C. A. 6); Wise Soda Apparatus Co. v. Bishop-Babcock-Becker Co., 240 F. 733 (C. C. A. 6); Bridgeport Brass Co. v. Ford Motor Co., 278 F. 881 (C. C. A. 6); Winters & Crampton Mfg. Co. v. Grand Rapids Brass Co. (C. C. A.) 62 F.(2d) 822; Central Brass Mfg. Co. v. Sterling Brass Co., 285 F. 135 (C. C. A. 6); Wagner v. Meccano, Ltd., 246 F. 603 (C. C. A. 6).
Undoubtedly this case could be disposed of on the ground of noninfringement. There is a wide departure from the patent in suit by both the plaintiff and the defendant in their successful commercial structures. The claims contain details which are not found in the defendant’s structure. No one has ever used the structure shown by this patent in suit. No one wishes to use the transverse current of air which is emphasized in the patent. The defendant does not use the angle iron which the patent emphasizes as a cradle for the radiator. I am not inclined to narrow a patent down to a razor edge and then say it misses the defendant’s structure because it is so narrow.. Such a policy would not be of any real value to the owners of such patents, because the business world would make the slight changes necessary to avoid infringement. On the other hand, such a policy would be harmful to the business world. A worthless patent should not prevent a business man from manufacturing and selling the best structure he is able to make with the least expenditure of money. The patent law was intended as a thing.to be helpful by encouraging genius to invent. It gives the monopoly for seventeen years as a reward for the service so rendered by that genius. If a patent like this were to be held valid, and then by the rule of equivalents the claims were interpreted broadly, the patent law would become a menace to business. Here is an art which prior to Shurtleff had been crossed and recrossed in every direction by prior patents and prior uses until any mechanic who wished to travel in the art could visit any of the places on the Shurtleff map. There may be some coal mines and gas wells still concealed which may later be discovered in this art for the benefit of the world, but the surface of the art was thoroughly developed, and all of these things which Shurtleff claims to have discovered were lying around on the surface of the art, in plain view of all the mechanics who traveled the old, well-known roads. It is possible to cross this continent by combining many old and well-known routes. Applying further the analogy, Shurtleff says he disclosed a new route because he journeyed two miles west on route 1, then north seven miles on route 2, then west ten miles on route 3, and in this manner finally crossed the old continent, through old roads all the way, but he insists that he is a discoverer because no traveler can be found who took exactly the same turns throughout the entire journey. Such a traveler is not a discoverer, but, at best, a guide. Such a builder is not an inventor, but, at best, a good mechanic.
Plaintiff complains because of the large number of prior patents pleaded by defendant as anticipation. In a large measure this was made necessary by the fact that the patent in suit is for an aggregation of old things, well known in the art. If the traveler who crosses the continent by using many old roads claims to have discovered a new route, it would be necessary in order to disprove his claim to show each and all of the routes he had used to be old and well known.
If we ignore those unimportant details of the patent, which fall within the province of the mechanic, and give to plaintiff the broad invention claimed, it would be for a fan, the radiator above the fan, and a vertical discharge of air. Of course, there must be an intake for the air, and there must be a by-pass for cool air when it is not desired to pass the fresh air through the radiator. All of these things standing alone were very old in the art if that word “art” is used as applicable to the heating and ventilating art, as it should be. See United States patents: Horton, 245,379 of 1881; Powers, 558,610 *707of 1896; Corbin, 593,737; Andrews, 946,-911 of 1910; Geissinger, 1,022,188 of 1912; Kmntz, 1,104,680 of 1914; McGinniss, 1,238,-880 of 1917; Berry, 1,295,416 of 1919; Miles, 1,343,330 of 1920; and Baetz, 1,488,225, filed May, 1920, issued 1924. See, also, such patents as British patent to Guerten, No. 155,306 of 1920. The patent law does not recognize one art for cold water faucets and another art for hot water faucets. They are both in the plumbing art. Speaking of the heating and ventilating art, we find the elements of this claimed combination in almost every conceivable arrangement. It was old to place the radiator between the outside air intake opening and the fan, and in that manner cause the fan to suck the air through the radiator. It was also equally old and well known to place the fan between the intake opening and the radiator and blow the air through the radiator. The fan had been placed above the radiator and it had been below the radiator. Some had made the intake for fresh air below the radiator and others had placed the intake above the radiator. The prior art had usually placed the whole unit on the floor, but some had hung the unit on the wall. The radiators had usually been made of east iron, but radiators had been used which were made of pressed steel and others were made of copper. See such patents as the British patents heretofore referred to and also United States patent to Briscoe, No. 858,-258 of 3907; Pease, No. 1,291,632 of 1919; and Soule, No. 1,510,807 filed October, 1920, and issued October, 1924; and Harrison, No. 1,530,559, filed April, 1919, and issued March, 1925. I might also refer to the publication by the German firm of Masehinenfabrik CgKiefer and the French firm of Leeomte & Rozo. All of these units had been made with jackets or casings in order -to better suck and drive the air along the desired route. In this art, steam or hot water is forced through the radiator for the purpose of heating the air current as it passes over the surface of the radiator. It had been taught in this art pri- or to Shurtleff that the radiator of the automobile, which used the air around the radiator to cool the water within, could be used in this art to heat the air surrounding the radiator. Shurtleff picked this aggregation of old elements and grouped them together. Plaintiff urges that it be called a patentable combination. To do this would be committing the error which I have attempted to illustrate. Because a traveler journeys over many old roads in crossing the continent, he should not be declared a discoverer, even though no prior traveler had turned from each old road to the other old road at the particular turning places. The many patents, uses, and publications pleaded from the prior art disclose all that is useful in Shurtleff. The prior art is so filled with similar structures that it would he useless to refer to them by name. For example, take that element of the claims described as high velocity vertical discharge of air against the ceiling. That was old. There were many disclosures of this feature. The very piano box type of unit heating and ventilating which Shurtleff was making when he applied for this patent and for years previous thereto had a high velocity vertical discharge against the ceiling. That had been discovered years before. Undoubtedly it produced some new and useful result, but Shurtleff came too late to get any credit for it. Where competition is very great, as it has been in this art, an inventor is often seeking more for refinements which will help his concern in making sales by boosting talk and advertising than, he is for something which will be of particular service to mankind. It seems to be as desirable to have a unit which can be sold to a school board as it is to have one which will furnish fresh air to the children and keep them warm. In the claims in suit we have as one element the fan below the heating radiator. The testimony and the advertising might convince one that this was a great advantage. As usual, it is here claimed by the plaintiff that this invention has revolutionized the art. Since Shurtleff applied for this patent with the fan below the radiator, plaintiff has devised what it claims to be an equally good or better unit with the fan above the radiator. Plaintiff is now selling as many of the units with the fan above the radiator as it is selling with the fan below the radiator. The fan had been in every conceivable place before the time of Shurtleff. All of these things shown by Shurtleff are things which a mechanic in this art ought to be permitted to Use without interference by Shurtleff, because Shurtleff did not invent them. The arrangement of these old things is for the mechanic. Ho will vary their arrangement and position somewhat to fit the outside temperature furnished by the climate in the particular location and by the temperature desired on the inside, the use to be made of the particular room, and by many other things, including the advertising which the particular concern wishes to use in making sales to the gullible American people.
It does not matter whether Shurtleff thought, through his own initiative, to use a so-called light-weight radiator like the one used in the automobile, or whether someone *708else gave him the suggestion. The knowledge and use were old in the art. The defendant was the first to make extensive commercial use of the so-called light-weight radiator: The defendant first used the copper radiator by installing it in the same place where the cast-iron radiator had been used in the old piano type unit. This made a satisfactory heating and ventilating unit. I have not heard any criticism of the old piano type unit which was in use long before Shurtleff except that it took up too much room. It was just as good as the modern unit so far as heating and ventilating a room was concerned. ' It does extend farther out in the aisle. It pulls the air in from the outside, heats it, and shoots it vertically to the ceiling. There has been some testimony about the noise made by different units. That has no place in this lawsuit, for surely Shurtleff did not solve any problem about noise. He was laboring under the impression that he wanted resistance. He got resistance by starting the cold air in one passageway, then having it turn and pass transversely through the radiator and then make another turn so that it could go vertically to the ceiling. The resistance and the turning of the air current would tend to make a buzzing sound. Shurtleff wasted one perfectly good highway over which the air traveled in his device. There was no occasion for having three roads, two of which roads were vertical and parallel to each other and the third road cutting across transversely from one of the vertical roads to the other. The device would have worked much better as defendant built the unit with the road for the air to travel leading directly up through the radiator and out the top of the easing of the unit. By having the transverse current of air, Shurtleff not only wasted one passageway, with the result that the unit was larger than was necessary, but he caused unnecessary noise and created the necessity for more fan power than otherwise would have been required.
The art with which we are dealing is not a difficult one to understand. It has to do with taking pure air from the outdoors, heating it, and delivering it into the room so that the room will be supplied with fresh air and kept at the proper temperature. A so-called unit heater and ventilator does not attempt to dispose of the foul air in the room. By forcing the fresh air into the room, the air of the room is naturally placed under slight pressure, and it is left to this air under pressure to find its own way of escape from the room. The principles involved are all easily understood. If the case has presented any difficulty, it results from the fact that all the things which Shurtleff thought he had discovered were old. He described those things which he thought he had discovered in such indefinite and uncertain language that it is possible to make some plausible argument for an interpretation which he never intended. I think it is fair to say that the greatest difficulty is found in determining what he did mean to claim by his indefinite and uncertain language.
_ In spite of the many defenses, I have decided to dispose of this case on the ground of invalidity. Giving to plaintiff the benefit of having claimed in a proper manner the monopoly for whieh he asks, then all of these claims now in suit are void because they are old. Those claims are Nos. 1, 3, and 5 of patent No. 1,744,511 and reissue No. 18,-374; and also claims 17, 18, 19, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, and 34 of reissue No. 18,374.
A decree will be entered dismissing the bill, with costs to be taxed. The foregoing opinion will stand as findings of faet and conclusions of law in conformity with equity rule 70½ (28 USCA § 723). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219012/ | BOURQUIN, District Judge.
In this final hearing in the suit (Central Union Trust Co. of New York v. North Butte Mining Co.) reported in (D. C.) 26 F.(2d) 675, wherein is change in plaintiff’s name and an unnecessary intervener, the issues have dwindled to the validity of $8,006 of the bonds and the excess thereof due the pledgor of them to intervener.
The defendant company alleges that without consideration the bonds were appropriated by one John W. Neukom and pledged to intervener.
The evidence discloses that at least from February, 1926, to November, 1927, Neukom was a director, assistant secretar, and state agent of said defendant, his salary and office allowance $1,800‘ per year. In addition, during 1920 from February to December he presented six bills in the main for special legal services from December, 1925, to December, 1926, in respect to the “Tuolumnee merger,” aggregating $7,925. These were paid without corporate action, but attached are vouchers indorsed, “Correct E. R. Grochan, Assistant Secretary,” and, “Approved F. R. Kennedy, Treasurer,” neither of whom appears to have had authority to that end.
In the minutes of a directors’ meeting of December 26,1926, and attended by Neukom, is entry it was unanimously “resolved that the acts of the executive officers in the sale of $8,-000 of the company’s” bonds “is in all respects approved, ratified and confirmed.”
January 7, 1927, Neukom received said bonds upon another bill dated December 30', 1926, which states it is a “duplicate of statement rendered Oct. 14, 1926. Special services rendered in connection with North Butte-Tuolumnee merger; analysis of merger agreement; report on closing merger; report and 'opinion re-affecting charter; analysis capital structure on stock issue and exchange treasury stock situation; set up of merger and exchange of stock from legal and accounting standpoints; preparation of data in financing bond sales campaign; miscellaneous consultations, conferences, etc., $10000. Payment of above is to cover settlement in full for all services rendered in calendar year 1926. Received in full payment of the above amount,” the $8,000 bonds and $2,000 money. This bill, to the extent of the $2,000 money only, has voucher attached indorsed as the others, save by Atwater, president, instead of by the assistant secretary, equally unauthorized.
The only other entries in the books are of later date and ascribe delivery of the bonds to Neukom for special legal services. Thereafter Neukom pledged the bonds to intervener though testifying he theretofore gave them to his wife.
The bill last aforesaid is in large part duplication of the other bills, and otherwise its particular items are within the scope of their general items. And one of the other bills for $1,021 includes October 14, 1926.
One of defendant’s by-laws provides that “no director or executive officer of the Company shall be entitled to any salary or compensation for any services performed for the Company unless such salary or compensation shall be fixed by resolution of the Board of Directors or of the stockholders.”
Gow testified that he as director of and for Tuolumnee negotiated the merger; that he is president and director of defendant since November, 1927; that Neukom had no part in the merger, did not even know of it until completed, told Gow so, and expressed resentment for that Kennedy “did not let him in on it”; that long prior to the merger Neukom proposed he undertake a sale of - Tuolumnee to defendant, which came to nothing; that in 1927 witness heard Neukom tell Jahn, defendant’s then president, that he secured the bonds pursuant to the board’s resolution, denied by Jahn, Neukom responding “it was a sort of stand-up vote after you went out.”
Jahn, president of Tuolumnee until merger and then of defendant, testified he was present at the meeting of the entry of the resolution, and none such was before the board; that he “heard nothing of it. Later, I asked Neukom about it, and he said it was ‘passed after you went out.’ I did not go out until adjourned;” and that “Neukom had nothing to do with the merger.” ‘
In behalf of intervener (and himself) Neukom testified that at the meeting of the entry of the resolution aforesaid, it is his “best recollection” the matter of his “compensation came up and was acted upon”; that he “does not recall” the conversation with Jahn aforesaid; that the bonds were for services in 1929, *7131921 in negotiations contemplating sale of Tuolumnee to defendant; that if successful he was to have a stock option, hut later he suggested he ought to have different compensation and Atwater proposed $10,009 bonds and cash.
On cross-examination he admitted the negotiations aforesaid were on a commission basis, were dropped, and _no bill presented for services until the bill upon which he received the bonds and cash, wherein at Atwater’s suggestion he set out was for services in 1926; that he did not keep the minutes and was surprised that the resolution was in form approval of a sale of the bonds for he bought none; that in 1926 one Joseph B. Cotton was general counsel and without corporate action employed witness; that his analysis of the agreement was subsequent to merger, and the item “report and opinion,” etc., in said bill is a “mistake”; and that he gave the bonds to his wife but later pledged them to intervener. If Neukom’s interest could be promoted by indicated witnesses, none appeared.
The evidence, even intervener’s, is clear that the bonds were appropriated by Neukom without corporate authority, action, or consideration, in fraudulent breach of trust. Analysis to demonstrate it would be as idle as to convince that two and two make four. Theretofore, for any service rendered, Neukom had received compensation whether or not valid and earned. And it is apparent that the entry of the resolution was of falsehood in substance and of action, doubtless in surreptitious endeavor to comply with the bylaw aforesaid and supply a record against the hour of need.
For any Neukom’s service during his official tenure and of it or not, was within the broad terms of the by-law, doubtless intended to check forays on the treasury without knowledge of and sanction by the board, intended to defeat the common strategy of special service by mere managerial authority, one of the devices by which corporations are bled, stockholders robbed, and officers and other insiders enriched.
If Cotton employed Neukom, it was without authority to do so at corporate expense. It is of an ancient maxim that general counsel cannot thus delegate his duties of skill and discretion by the corporation delegated to him.
The situation disclosed is more of set-up or hold-up than of stand-up, is of collusion, perhaps to compensate Neukom for Kennedy’s failure to “let him in on it,” in on the good thing a merger generally is.
The bonds fraudulently secured from defendant, the intervener has the burden to establish its status as holder in due course. It suffices to say this it has done in so far as the pledge to it is unredeemed, viz., $4,000 with 6 per cent, interest thereon from December 9,1930, until paid. And for so- much plaintiff is entitled to decree.
Concurrent with payment, intervener will deliver all bonds and coupons for cancellation. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219013/ | BARRETT, District Judge.
This is a suit against B. C. Poppell, section foreman, and the Atlantic Coast Line Railroad Company, seeking to recover for damages caused from setting fire to the right of way of the railroad by a passing locomotive and the spreading of the fire to the lands of plaintiff. The negligence alleged is not in any way connected with the locomotive, but because of permitting ignitible grass and other substances on the right of way, when it was the duty of the railroad “to keep its right-of-way reasonably free and clear of dry grass and weeds and other easily ignitible substances.”
It is alleged: “Said defendant Poppell was the section foreman in charge of that particular portion of said right of way where and upon which said fire originated and it was the duty of said Poppell, for the protection of the public against the danger and hazard of fire from the operation of trains, to keep said right of way at said point and at said time reasonably free and clear of dry grass and weeds and other easily ignitible substances, which duty said defendant Poppell owed to the public not only in his capacity as section foreman, but also individually by reason of having undertaken and entered upon the performance of said work as hereinafter shown.”
It was further alleged that the defendants had cleared a portion of the right of way of such ignitible substances, but failed to clear a certain portion which was particularly hazardous by reason of the inflammable growth thereon, and that this created a duty and its violation. It is not shown that the danger was any greater because of the fact that a portion of the right of way had been cleared, and it is not shown that the omission to clear the part where the fire was set out was an act of misfeasance.
There is no question that there is set forth a cause of action against the railroad company. The sole question for determination is: Does the petition set forth a cause o'f action against Poppell? Both sides recognize that if such cause of action is not set forth against Poppell the motion to remand should not be granted. On the other hand, if a right of action is set forth against Poppell, the motion to remand should be granted; there being no evidence to show that the joining of Poppell was fraudulent, though it is so alleged by the railroad company.
This suit is in tort. It is essential to maintain an action in tort' that there must be a duty from the defendant to the plaintiff, and a violation of such duty. While it is true that there is the definite allegation in the petition that the “defendant Poppell owed to the public not only in his capacity as section foreman, but also individually by reason of having undertaken and entered upon the performance of said work as hereinafter set out,” and thus owed a duty to plaintiff as a member of the public, this is a mere conclusion, and its force must be governed by the facts existing as shown by the petition.
“ * * * The legal effect of the facts alleged is to be determined by the court, and not by the plaintiff.” Hough v. Societe Electrique (D. C.) 232 F. 635 (1); Williams v. Stewart, 115 Ga. 864 (2), 42 S. E. 256; Brown v. Mass. Mills, 7 Ga. App. 642, 67 S. E. 832.
Certain it is that Poppell, merely because he was working as a section foreman on the railroad, owed no individual duty to the public in the matter of keeping the right of way free from ignitible growth. He did owe a duty to his master to properly perform his duties, and if there was embraced in such duties the obligation to keep the right of way free from ignitible growth there would be a liability on his part to his master for failure to perform his agreement.
An employee is in many .instances jointly liable with the railroad, but a fair analysis of the cases so holding will disclose that the employee was doing some act which involved a duty from him to the public direct, as, for instance, operating a locomotive and omitting to comply with the law as to speed or crossings or the like, or cutting into a public highway and leaving the road in a dangerous condition and the like. This liability arises independent of whether he was employed by the railroad. While in each of the illustrations there may be a nonfeasance on the part of the employee, as, for instance, not blowing the whistle or not closing up the public highway, that was merely a negligent act in connection with his misfeasance of running the train or digging up the highway. As is well illustrated in the brief for the defendants, the employee would be liable if in the performance of his duty as such employee he set out a fire for the purpose of clearing the right of way of ignitible growth and carelessly allowed the fire to escape onto the lands of another, because no man has a right to carelessly set out or carelessly fail to control a fire to the damage of another.
Perhaps there is no better statement of what is a tort than is found in section 4463 of the Civil Code of Georgia, especially taken *715in connection with section 4406, which are as follows:
“§ 4403. * * * A tort is a legal wrong committed upon the person or property, independent of contract. It may be either—
“1. A direct invasion of some legal right of the individual.
“2. The infraction of some public duty, by which special damage accrues to the individual.
“3. The violation of some private obligation, by which like damage accrues to the individual.
“§ 4406. * * * Private duties may-arise either from statute, or flow from relations created by contract express or implied. The violation of any such specific duty, accompanied with damage, gives a right of action.”
For the application of the principle stated in these two sections, see Reid v. Humber, 49 Ga. 207.
There is not disclosed by the petition any duty on the part of Poppell to the public, including the plaintiff, to keep the right of way free of ignitible growth. Such duty not existing, there can be no action in tort against him, and there is not such cause of action set out in this ease.
Almost indefinite citations could be used in connection with like cases dealing especially with nonfeasance and misfeasance. The above principle is controlling, and such citations are unnecessary.
The motion to remand is denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219014/ | STRUM, District Judge.
This is a libel to recover for damage to a refrigerated cargo of citrus fruit loaded on board the steamship Georgian at Tampa, Fla., March 16, 1929, and transported by said vessel via Jacksonville and other South Atlantic ports to London, England, where it was unloaded on April 16, 1929.
*720The pertinent provisions of the bill of. lading are: i
That the fruit was received on board the vessel “in apparent good order and condition.”
That the vessel shall not be liable “for loss or damage occasioned by causes beyond their control; by the act of God; by the perils of the sea; * * * or unseaworthiness of the vessel even existing at the time of shipment or sailing of the voyage, provided the owners have exercised due diligence to make the vessel seaworthy; nor for heating, frost, decay, putrefaction, rust, sweat; vermin, change of character * * * or any loss or damage arising from the inherent vice, defect or nature of the goods, or insufficiency of packages.”
“Notice of loss, damage, or delay must be given in writing to the vessel’s agent within thirty days after the removal of the goods from custody of the vessel * * *. Written claims for loss, damage, or delay must be filed with the vessel’s agent within six months after giving such written notice. Unless notice is given and claim filed as above provided, neither the vessel, her owner or agent shall be liable.”
“The goods or articles carried in any refrigerator chambers are at the sole risk of .the owner thereof, and subject to all conditions, exceptions and limitations as to carrier’s liability and other provisions of this bill of lading; and, further, the carrier shall not be liable for any loss for damage occasioned by the temperature, risks of refrigeration, accidents, or explosion, breakage, derangement or failure of any refrigerator plant or part thereof unless shown to have been caused by negligence of the carrier, from lia^ bility from which the carrier is not exempt under the provisions of the Harter Act. * * *»
The ship was not chartered, but was carrying general cargo for hire and was, therefore, a common carrier subject to the provisions of the Harter Act (46 USCA §§ 190-195).
Libelant asserts that it was agreed that the fruit should be carried at a temperature of not less than 34 degrees, and not more than 38 degrees, Fahrenheit; but that contrary to such agreement the temperature was negligently permitted to .fluctuate above and below those limits, damaging the fruit by frosting, overheating, and by “drip” from overhead refrigerating coils due to condensation when the temperature rose too high to hold the “snow” or “frost” on the refrigerating ■pipes; also, that sea water was negligently permitted to enter the holds, especially No. 4, damaging the packing cases therein.
Respondents deny, these charges and claim that the preshipment cleaning treatment to which the fruit was subjected bruised, punctured, and otherwise injured the fruit, causing softening and decay, and that deterioration of the fruit was due, not to negligent refrigeration, but to “decay, inherent vice, defect or nature of the cargo,” for which respondents are not liable under the terms of the bill of lading; and that the damage caused by sea water resulted from a peril of the sea, which is also excepted by the bill of lading.
Respondents also claim that notice of damage was not given in writing to the vessel’s agent within thirty days after removal of the goods, which is made a condition precedent to liability by clause No. 11 of the bill of lading.
At the time in question, about 98 per cent, of all Florida fruit was cleaned for marketing by a “wet-wash” process, by which the fruit is first washed in water and then passed through a soaping tank containing slightly warmed water and a solution of borax, after which it was subjected to a paraffin vapor.
Most of the fruit here involved was cleaned by a dry-cleaning device then in use at the Tampa Terminal Company. This device consisted of a large hollow cylinder about thirty feet long and three feet in diameter, lined inside with brushes and containing a quantity of sawdust. The cylinder was inclined at an angle of about forty-five degrees, the fruit entering at the high end,, and as the cylinder revolved the fruit passed through it and out at the lower end; the rust and dirt on the fruit being cleaned off in the passage through the cylinder by rotary contact with the brushes and sawdust. Respondents claim, but libelant’s witnesses deny, that this process bruised the fruit, and that the stems of the fruit punctured other fruit passing through, thus causing the fruit to become soft and inherently susceptible to quick decay, notwithstanding proper refrigeration.. The libelant discarded this dry-cleaning device as unsatisfactory soon after the shipment in question was made. Respondents assert that this was done because the process injured the fruit, while libelant’s witnesses testify that the machine was discarded simply because it did not clean the fruit satisfactorily.
When unloaded in London and subjected to normal temperatures, the fruit quickly broke down and became soggy and inferior.. *721All of it was in a state of “full maturity.” Some of it showed.stem-end decay; some of it was withered and pitted. Many of the eases coming from No. 4 hold were stained by sea water.
There is convincing evidence both of injurious preshipment treatment and of negligent refrigeration during the voyage, though the evidence is replete with perplexing conflicts upon almost every material question of fact. As between the two theories as to the cause of the damage, the evidence is nicely balanced.
In support of respondents’ contention of injurious preshipment treatment, the evidence establishes that the dry-cleaning machine above described was installed “on trial” in libelant’s packing house during the fall of 1928. This machine was discarded as unsatisfactory a few days after the fruit in question was loaded on the steamer and the wet-wash process installed in its place. There is evidence on behalf of libelant that the machine was discarded simply because it did not clean the fruit satisfactorily, not because it damaged the fruit. This evidence, however, is outweighed by contrary evidence.
Under date of March 12,1929', eight days before this cargo was loaded and while the cargo was being prepared for shipment, the president of the libelant, Tampa Union Terminal Company, addressed a letter to the local agent of the manufacturer of the dry-cleaning machine, in which amongst other things it was said: “We find that grape fruit run through the dry cleaners supplied by you * * * are being severely damaged and we are constantly having comments coming back from the market that the fruit is soft. We have found upon examination of fruit in the bins that a very large percentage of the fruit of larger sizes are soft, this condition decreasing as the fruit decreases in size. However, in all sizes of fruit the amount of soft fruit produced by the action in the dry-cleaner is so large that we cannot continue to operate these dry-cleaners in their present form.” Then follows the writer’s statement of his opinion as to what part of the machine caused the damage, and suggesting that certain changes be made in the machine, to be followed by further experiments.
Under date of April 9, 1929, nineteen days after the fruit in question was loaded, another letter was written by the libelant’s president to the manufacturer of the dry-cleaning machine, which contains the following statements: “These dry-cleaners never, at any time, were satisfactory or produced a commercially acceptable product, and yet, at many times there was apparently so much merit in the idea and apparently the results were so close to being commercially acceptable that we have at all times borne with your continuous experimental efforts with the hope and wish that these machines would be placed in such a condition that we could continue to use them * * *. This condition has continued to exist up to the time that Mr. Sells was in our office on March 12th, when I frankly stated to Mr. Sells that these cleaners were not satisfactory, that they were not cleaning the fruit, but, more especially, were causing great damage by reason of bruising.” Then follows a reference to the former suggestion of alteration and further experiments. The letter then continues: “The results obtained from this change brought about cleaner fruit, but the amount of damage, bruising, is approximately the same. However, careful count has been kept on the quantity of fruit passed over this machine and when operating at any where near three cara of grapefruit per day the amount of bruising is very high, so much so, that it has been impossible for us to operate these machines upon many crops of fruit. * * * Buyers of fruit will not purchase grapefruit which has passed through this machine. The percentage of decay caused by bruising in oranges is higher than any known process. * * * We have been forced to suspend all operations and are now making the substitution of the first unit.”
Mr. B. C. Skinner, a manufacturer of wet-washing machinery in competition with the dry-cleaning process; but otherwise a totally disinterested witness, having many years’ experience in the preparation of citrus fruit for shipment, testified that he had observed the operation of the dry-cleaning machine, and that the rotary motion of the cylinder tended to pick up the fruit as high as fifteen to eighteen inches and drop it back on other fruit, causing bruising and stem puncture; that the extreme limit of fall that is considered safe is six to eight inches, the usual practice being to keep it under three inches. Mr. Skinner further testified that he made several experiments with the dry-cleaning machine and on one particular occasion he took a dozen of oranges at random as they came out of the machine, and hé and Mr. Judd, president of the libelant, Tampa Union Terminal Company, examined them together and found that there were stem punctures on eleven of the twelve oranges, and that these eleven oranges had one to six punctures in each fruit.
*722Mr. O. S. Turner, another experienced packer of twenty-four years’ experience, and a totally disinterested witness, testified that he had tried out one of these dry-cleaners in his plant, but rejected it as unsatisfactory because it bruised and injured the fruit, and forced the sawdust into the skin of the fruit, so that “I (the witness) would not think it would keep nearly as good, if it would keep at ah.”
Again, Mr. John L. Arnold, a totally disinterested witness, testified that he was present when the cargo in question was being loaded, and that fruit taken from a number of boxes opened by him was so soft and spongy that it could be taken between the fingers and squeezed until the top and bottom of the fruit would meet together, and that he called this to the attention of respondents’ president, who discussed the same with Mr. Judd, president of the libelant.
Mr. Hyde, the special refrigerating engineer on the steamer, testified that he observed the same conditions as Mr. Arnold, and discussed the same with Mr. Judd, president of the libelant.
From the foregoing and other corroborative facts apparent in the record, the court concludes that when this cargo was loaded it was affected by inherent vice, due to the preshipment treatment stated, which rendered the fruit more than normally susceptible to decay.
It is true that respondents, having had ample opportunity to inspect the fruit and note an exception on the bill of lading, nevertheless issued a clean bill of lading acknowledging receipt of the fruit “in apparent good order and condition.” That language of the bill of lading, however, under section 4 of the Harter Act (46 USCA § 193), creates only prima facie proof that the fruit, so far as visible, was not damaged. The Bencleuch (C. C. A.) 10 F.(2d) 49, certiorari denied, 271 U. S. 680, 46 S. Ct. 631, 70 L. Ed. 1148. As against the original shipper, the carrier is not estopped from showing the true condition of the shipment when received on hoard. The recital is not a warranty and is not conclusive as between the immediate parties. Amerlux Corp. v. Johnson Line (C. C. A.) 33 F.(2d) 70; American Finance Co. v. United States (D. C.) 55 F.(2d) 725.
On the other hand, there is convincing evidence of negligent refrigeration during the voyage.
The Tampa cargo, here involved, was stowed in refrigerated compartments of holds Nos. 1, 2, and 4, these compartments being above the lower holds and beneath the weather deck, being what is called “tween-deck” compartments. The compartments of holds Nos. 2 and 4 were completely filled with Tampa fruit. No. 1 was partly filled with Tampa fruit (about one thousand boxes), and the remaining space therein was filled with fruit loaded at Jacksonville on March 19', 1929. This Jacksonville fruit had not been subjected to the dry-cleaning process used on the Tampa fruit. The hatch-square of No. 5 hold was completely loaded with fruit at Jacksonville, there being no Tampa fruit in No. 5.
The refrigerated compartments in holds Nos. 1, 2, and 4 were cooled by an ammonia-brine system consisting of brine circulating under pressure through pipes suspended from the sides and tops of these chambers. The brine in the circulating pipes is cooled in the ship’s engine room by ammonia operating under compression. There were no circulating pipes in the hatch-square of No. 5 hold, that space being cooled by leaving open doors from No. 4 compartment.
The actual temperature in the refrigerated compartments was taken by thermometers suspended in breather pipes or temperature tubes, which extend vertically from the weather deck of the vessel down into the refrigerated chambers. In the engine room were also other thermometers which registered the temperature of the circulating brine both when it starts from the compressor in the engine room and when it returns to the engine room after having been circulated through the pipes into the refrigerated compartments. These two temperatures are not to be confused, as they are in entirely different circumstances, and each performs a different function. The brine temperature will always be much lower than the temperature in the refrigerated compartments, as it is the absorption of the heat by the circulating brine which lowers the temperature in the compartments. By comparing the brine temperature when it enters the circulating pipes with the temperature when it returns to the engine room, the amount of heat it absorbs in process of circulation is disclosed, thus giving an additional check on the temperature of the refrigerated compartments.
The most desirable temperature for stored citrus fruit is thirty-six degrees. It is harmful to the fruit to permit this temperature to vary more than two degrees up or down; that is, the temperature should remain between thirty-four and thirty-eight degrees. A temperature of above thirty-eight degrees is too *723warm to preserve citrus fruit, allowing softening or decay to commence, while a temperature below thirty-four tends to frost the fruit. Freezing occurs in citrus fruit at about twenty-eight or twenty-nine degrees, and thirty-one is a “critical” temperature. Also, when the temperature rises above thirty-eight degrees, the frost on the circulating pipes has a tendency to melt, causing water to drip down on the cargo below, unless the brine temperature is kept well down.
In order to regulate the temperature of the refrigerated compartments during the voyage, when they had a tendency to run too cold, both the overhead and side circulating pipes in all compartments were entirely cut off several times for substantial periods of time, though only in one instance does it appear that the compartment temperature rose above thirty-eight degrees before they were cut in again.
The deck log of the vessel shows a temperature in the refrigerated compartments either higher than thirty-eight degrees, or lower than thirty-four degrees; on the following days, and in the following compartments, these temperatures being taken by means of thermometers suspended through the breather tubes directly into the refrigerated compartments :
Date Compartment Temperature
March 18 1 39
20 1 44
21 1 40 and 41
2 32
4 32
22 1 39
4 33
23 2 33
4 32
24 2 32
4 32
30 2 33
31 2 31
1 April 4 29
4 2 31
6 2 33
4 33
11 1 33
2 33
4 33
It will be seen that especially in compartments Nos. 2 and 4 the temperature was much too low on several occasions, once going to twenty-nine, which is freezing for citrus fruit, while in No. 1 it was too high on several occasions, and once (April 11th) too low. No. 1 compartment was opened for several hours at Jacksonville on March 19th while loading of the Jacksonville fruit was in progress, which no doubt accounts for the high temperature of forty-four in that compartment on the following day (the 20th). The temperatures on March 21st indicate that in an effort to bring down compartment No. 1 to thirty-eight degrees, too much refrigeration was put on for compartments Nos. 2 and 4, which had only been opened in Jacksonville for a brief period of inspection, so that Nos. 2 and 4 fell to thirty-two' degrees.
The refrigerating log of the vessel, on which is recorded the brine temperatures, also shows much fluctuation. For instance, on April 1st the brine “in” was as low as seven degrees, and “out” at nine degrees; while on March 29th and 30th, the brine temperature was as high as twenty-eight degrees “in” and twenty-nine degrees “out”; on April 2d, the brine temperature fluctuated from nine degrees “in” and eleven degrees “out” to thirty degrees “in” and thirty-two degrees “out,” although the brine range or “split” appears to have been kept fairly constant at one to two degrees of difference between the “in” and “out” temperatures. The lower tempera^ ture given above is that of the brine when entering the circulating coils; the higher temperature is that upon leaving the coils.
The refrigerating log, which also shows the temperature in the compartments themselves, discloses material fluctuations, notably, on March 21st, forty degrees practically all day in No. 1, and thirty-nine degrees in that compartment on March 22d; on March 25th, thirty-three degrees for eight hours in compartments Nos. 1, 2, and 4; and the same temperatures again on March 26th; on April 4th, thirty-two degrees in No. 1; on April 6th, thirty-three degrees in No. 1, thirty-two degrees in Nos. 2 and 4; on April 10th, thirty-three degrees in Nos. 1, 2, and 4, and on several other days temperatures of thirty-three degrees were shown. These temperatures unquestionably subjected the fruit to a greater range of temperature than is regarded as prudent in the storage of such fruit.
Respondents contend that there was no agreement to carry the fruit at between thirty-four and thirty-eight degrees. Telegrams and conversations shown in the evidence to have been passed between the parties prior to the loading of the fruit are tantamount to such an agreement; but if this agreement was merged in the bill of lading which does not specify the temperatures, the testimony abundantly establishes that ordinary and reasonable care and prudence required the fluetua*724tions of temperature be kept within two degrees of thirty-six, the experience of the industry being that a wider fluctuation is deleterious.
Shortly before the vessel reached London, the captain radioed, requesting a hatch survey upon arrival. When the refrigerated compartments were opened) there were present a representative of the Port of London Authority, also surveyors representing the vessel and the receivers of the fruit in London, the cargo being consigned to the order of libelant, notify Roberts Brining & Co. The vessel’s chief mate, refrigerating engineer, and a special refrigerating engineer who had accompanied the vessel on the voyage, were also present.
The testimony of these witnesses presents a most pronounced conflict. The chief mate of the vessel, who opened the doors to the refrigerated compartments, the special refrigerating engineer, who accompanied the vessel, the regular refrigerating engineer of the vessel, Captain King, a surveyor representing the Port of London Authority, and Captain Bridger, representing the agents of the vessel, testified that when the doors were opened, and before bulk was broken, the refrigerated compartments were dry and in good order, except a little water in Nos. 2 and 4, the brine eoils being crystal hard and frosted, with no evidence of dripping.
Captain Oliver and Captain Robertson, surveyors representing the “notify” consignees, who were present and entéred the compartments at the same time, testified there was no frost on the circulating pipes, and that the coils were wet and dripping, the fruit being wet and damaged. The latter witnesses also testified positively that there was evidence of condensation in the refrigerated chambers, and that the damaged condition of the fruit was due to the temperature being kept either too high or too low during the voyage, and in general by severe wetting due to condensation. The testimony of these witnesses is irreconcilable.
It is clear, however, that the fruit arrived in a state described by all as “full maturity,” and that soon after it was unloaded into the normal atmosphere, it “broke down” and much of it began to decay, and was spongy and soggy, and the paper wrappers water sodden. The Jacksonville fruit in No. 1 compartment disclosed wetted cases (apparently not from sea water), and some of the Jacksonville fruit, notably the Blue Dragon and Green Dragon brands of oranges and tangerines, showed a substantial percentage of damage and waste; the tangerines especially being found dry and withered and practically devoid of juice. These circumstances tend to establish negligent refrigeration, as the Jacksonville fruit had not been subjected to the Tampa dry-cleaning process. On the whole, however, the Jacksonville fruit, generally speaking, arrived in much better condition than the Tampa fruit. The evidence also establishes that three cargoes of citrus fruit were previously shipped under refrigeration from Tampa to London, in other steamers, all of which former cargoes were prepared for shipment by the same dry-eleaning process used on this shipment. All of these shipments arrived in London in good condition, which further tends to support the theory of negligent refrigeration on this voyage.
The evidence of the existence of actual preshipment damage to this fruit, however, resulting in inherent vice, is too strong to be ignored. The court is convinced that while there was negligent refrigeration on the voyage, the Tampa fruit was predisposed to softening and decay by the preshipment treatment above described, and that both of these causes substantially contributed and concurred to produce the softened and soggy condition of the fruit upon arrival in London, and caused it to break down and begin to decay.
On April 17, 1929, after the fruit was all unloaded, the chief mate of the vessel made the following entry in the vessel’s deck log, as of April 16, 1929: “Approx. 30% of Fruit Cargo (boxes only) stained & wet caused from overhead Freezing Line in all Compartments, which is not insulated & water & frost dripping down on Top Tiers of Fruit.”
Immediately following that entry, the following also appears in the deck log: “In Compartment No. 4 leaky, deck caused Sea water damage to quite a number of fruit boxes.”
Both libelant and respondents agree that this entry was made by the chief máte pursuant to the directions of Captain Robertson, the surveyor in London who represented the “notify” consignees. The mate specifically testified that the entries were not made of his own volition, or upon bis own knowledge, but at the direction of “one of the numerous Captains” who came on the vessel as surveyors, which one he could not remember, but he thought he was a man of superior authority, whose instructions were to be obeyed. Hence, he made the eáfries as directed. These circumstances strip the entries of much of their probative force as evidence of the cause of *725damage to the fruit. The effect of the entries, as notice to the vessel and her agents, will hereafter be referred to.
The vessel encountered two severe storms during the voyage, the first on March 28th, 29th, and 30th, when the vessel was north and east of Hatteras, and the second on April 6th, 7th, and 8th, when the vessel was “considerably southeast” of the Newfoundland Banks. According to the estimate of the ship’s officers, the first storm reached a wind force of nine, which is rated on the Beaufort Seale of Mariners as a strong gale — a wind velocity of forty to forty-eight miles per hour. The second storm reached a wind force of ten, a whole gale — a velocity of fifty-six to sixty-five miles per hour. During these storms the ship labored very heavily; constantly shipped heavy seas at the bow, stem, and amidships; and had to be slowed to half speed and hauled off her course for safety. The ship’s officers testified that the second storm was one of the worst they had ever encountered.
By the captain’s testimony, however, it appears, from a pilot chart issued by the United States Hydrographic Office, that the number of days in the month of March on which, according to experience over an eleven-year period from 1897 to 1907, inclusive, winds of the force of eight and over have been recorded at or about the point where the first storm occurred, was eleven days; and according to the same chart the number of days in the month of March that such winds were recorded at or about the point of the second storm was twenty days.
The heavy weather encountered by the vessel made operation of the refrigerating plant more difficult than usual, and the taking of deek temperatures hazardous, sometimes impossible.
The vessel had been overhauled and converted into an oil burner, and a modem refrigerating plant installed only a few months before the commencement of the voyage in question. Routine inspection of the vessel itself had been made by representatives of the American Bureau of Shipping a short time before the voyage, and the vessel certified as seaworthy. The installation and operation of the refrigerating plant was inspected by a representative of the same bureau immediately before this voyage, and pronounced satisfactory and in good order.
Around the hatch coamings, on the weather deck, were steam feed pipes running to the deek winches, the pipes being about six inches above the weather deck. In order to protect these steam pipes, there is a steel plate about eighteen inches wide running along and above the steam pipes, this plate being mounted on steel brackets. The brackets rest upon the steel weather deek and are secured thereto with bolts and nuts, a hole being drilled through the weather deek to receive the bolts. The force of the sea coming over the weather deck and under these steel guards, during the second storm, carried away some of the supporting brackets, as well as the guards themselves, with the result that some of the bolts were tom out of their holes, leaving a number of open holes in the weather deck approximately one inch in diameter, through which sea water entered No. 4 refrigerated compartment before the holes could be plugged up.
For the damage done by sea water in No. 4 hold, the respondents are bable. Such damage was not occasioned by a peril of the sea within the meaning of the Harter Act and of the bill of lading. The exemptions of section 3 of the Harter Act (46 USCA § 192) are not available to the shipowner unless the vessel was seaworthy when she sailed, or due dibgence to make her so had been exercised. International N. Co. v. Farr, 181 U. S. 218, 21 S. Ct. 591, 45 L. Ed. 830. Seaworthiness, or due dihgenee to attain that condition, is a condition precedent to the exemptions of the Harter Act just mentioned. The Southwark, 191 U. S. 1, 24 S. Ct. 1, 48 L. Ed. 65; The R. P. Fitzgerald (C. C. A.) 212 F. 678; Newhall v. United States (D. C.) 8 F.(2d) 422.
The burden of estabbshing seaworthiness, or showing due diligence to that end, is upon the shipowner. International N. Co. v. Farr, supra; The Leerdam (C. C. A.) 17 F.(2d) 586; McCahan Sugar Refining Co. v. The Wildcroft, 201 U. S. 378, 26 S. Ct. 467, 50 L. Ed. 794; Jahn v. The Steamship Folmina, 212 U. S. 354, 29 S. Ct. 363, 53 L. Ed. 546, 15 Ann. Cas. 748; The Phoenicia (D. C.) 90 F. 116; The Ninfa (D. C.) 156 F. 512; The Indrapura (C. C. A.) 190 F. 711.
Doubts upon these questions are resolved against the ship. Bradley Fertilizer Co. v. Lavender (The Edwin I. Morrison), 153 U. S. 199, 14 S. Ct. 823, 38 L. Ed. 688.
Surveyors’ or inspectors’ certificates of seaworthiness are not conclusive. Newhall v. United States (D. C.) 8 F.(2d) 422; Rosenberg Bros. & Co. v. Atlantic Co. (D. C.) 25 F.(2d) 739; The Abbazia (D. C.) 127 F. 495.
While a vessel, to be seaworthy, is not required to be impregnable or of the most improved construction, she must be reasonably fit to carry the cargo which she has undertaken to transport. The Silvia, 171 U. S. *726462, 19 S. Ct. 7, 43 L. Ed. 241; The Southwark, 191 U. S. 1, 24 S. Ct. 1, 48 L. Ed. 65; The Ninfa (D. C.) 156 F. 512; Franklin Fire Ins. Co. v. Royal Mail (C. C. A.) 58 F.(2d) 175.
Perils of the sea mean conditions which are so extraordinary or catastrophic as to overcome those safeguards by which skillful and diligent seamen ordinarily bring ship and cargo to port in safety, that is, conditions which could not have been foreseen in the exercise of reasonable prudence, or which could not have been guarded against by exertion of ordinary human skill and experience. The Rosalia (C. C. A.) 264 F. 285; The City of Dunkirk (D. C.) 10 F.(2d) 609; The Oakley C. Curtis (D. C.) 285 F. 612; The Edith (C. C. A.) 10 F.(2d) 684.
The “due diligence” required by section 3 of the Harter Act as a condition precedent to the benefits of that act, requires the owner to take such precautions as are reasonably adequate for the protection of the cargo against known perils, and against those which reasonable foresight might have anticipated. The R. P. Fitzgerald (C. C. A.) 212 P. 678, certiorari denied Taylor v. Cleveland Grain Co., 234 U. S. 757, 34 S. Ct. 675, 58 L. Ed. 1579. In the absence of that degree of diligence, the owner cannot invoke the provisions of section 3 of the Harter Act for relief. Herman v. Compagnie (C. C. A.) 242 F. 859. See, also, The Carib Prince, 179 U. S. 655, 18 S. Ct. 753, 42 L. Ed. 1181. This requirement of due diligence is not satisfied merely by the production of surveyors’ certificates of seaworthiness. Newhall v. United States (D. C.) 8 F.(2d) 422; Rosenberg Bros. & Co. v. Atlantic Co. (D. C.) 25 F.(2d) 739; The Abbazia (D. C.) 127 F. 495; Standard Oil Co. of New York v. United States (D. C.) 26 F.(2d) 385.
Where a cargo is damaged by sea water entering through rivet or bolt holes in the deck, the fact that the vessel encountered heavy seas during the voyage is not alone sufficient to support a finding that the damage was due to perils of the sea, in the absence of proof that the rivets were in good condition at the commencement of the voyage. The Citta di Palermo (D. C.) 226 F. 522, affirmed (C. C. A.) 226 F. 529.
The manner in which these steam-pipe guards were installed and secured to the weather deck was open and patent. There is no evidence that the bolts holding these guards were inspected, or that they were in good condition and free of rust or corrosion at the beginning of the voyage (Unterweser v. Potash Corp. (C. C. A.) 36 F.(2d) 869; The Leerdam (C. C. A.) 17 F.(2d) 586; The Citta di Palermo, supra), though, of course, it is not essential to due diligence that every hidden rivet or bolt on the ship be tapped or inspected before sailing.
It is true that on the voyage in question this vessel encountered rough seas and high winds so that she rolled and pitched considerably and shipped heavy seas; but at this sea/son of the year, following close upon the vernal equinox, such gales and seas as were encountered by this vessel were reasonably to be expected in North Atlantic waters. There is nothing so unusual or catastrophic about these storms as to excuse the vessel as for a peril of the sea. Respondents are therefore liable for the entire damage done by sea water in No. 4 hold.
As to the remaining damage to the cargo, however, resulting in the “broken down” condition of the fruit, and its state of deterioration upon arrival in London, the court is of the opinion that such damage is attributable both to inherent vice of the cargo and to negligent refrigeration during the voyage, which negligence cannot be contracted against. It is impossible to ascertain the exact proportion of damage for which each of these causes is responsible. The best that can be done in these circumstances) and what other courts have done, is to equally divide the damages between the parties, in analogy to the admiralty rule in collision eases where both parties are at fault. The Chaika (C. C. A.) 65 F.(2d) 714. Accordingly, it is held that libelant is entitled to recover only one-half of the damage other than that caused by sea water. American Finance Co. v. United States (D. C.) 55 F.(2d) 725; Stillwell v. The J. D. Hall (D. C.) 34 F. 904; The Shand (D. C.) 16 F. 570; Snow v. Carruth, Fed. Cas. No. 13,144; The Young America (D. C.) 26 F. 174; The Musselcrag (D. C.) 125 F. 786, reversed in part Corsar v. J. D. Spreckels & Bros. Co. (C. C. A.) 141 F. 260.
As to the requisite notice of damage:
The authorities draw a distinction between notice of damage and claim for damages. See Russo & Co. v. United States (C. C. A.) 40 F.(2d) 39; Anchor Line v. Jackson (C. C. A.) 9 F.(2d) 543. They perform different functions. Chicago, R. I. & P. Ry. Co. v. Williams, 101 Ark. 436, 142 S. W. 826. Strict compliance is usually required with respect to the claim for damage, such as was involved in The Queen of the Pacific, 180 U. S. 49, 21 S. Ct. 278, 45 L. Ed. 419; Southern Pac. Co. v. Stewart, 248 U. S. 446, 39 S. Ct. *727039, 63 L. Ed. 350; St. Louis, I. M. & S. R. Co. v. Starbird, 243 U.S. 592, 37 S. Ct. 462, 61 L. Ed. 917; Erie R. Co. v. Stone, 244 U. S. 332, 37 S. Ct. 633, 61 L. Ed. 1173; and The Westminster (C. C. A.) 127 F. 680, relied upon by respondents. The rule even as to claim for damages is sometimes relaxed, however, where the shipowner knew the facts. The Natal (C. C. A.) 14 F.(2d) 382, certiorari denied 273 U. S. 748, 47 S. Ct. 449, 71 L. Ed. 872.
As to the notice of damage, however, with which we are here concerned, the rule is not so strict. The purpose of a notice of damage is to facilitate prompt investigation, not to afford an avenue of technical escape from liability. When this cargo was unloaded, surveyors representing the vessel’s agents were present and examined the cargo, so that they were then fully aware of the existence of the damage, for which claim was later made. These surveyors immediately reported the damage found to the vessel’s agents in London. The above-quoted written entries were then placed in the log by the chief mate of the vessel at the direction of the representative of the London agents of the libelant. Thus the vessel and her agents had written notice on April 17, 1929, that there had been damage to the cargo, and the vessel’s representatives had actually made a complete investigation of the nature and extent of the damage. No more certain means of notice to the vessel’s agents could be devised than an entry in her official log. A formal notice by letter could have accomplished nothing more, it being admitted that the vessel and her agents were fully cognizant of the existence of the damage. In this respect respondents rely solely upon the technical contention that formal anil conventional notice was not sent. Libelant attempted to prove that such a notice was in fact given, but the court is not convinced that such formal notice was given.
The entries in the deck log above quoted, however, admittedly made at the direction of a representative of Roberts Brining & Co., who were„ receiving the fruit in London on-behalf of libelant, constitute a sufficient notice of damage as distinguished from claim for damage, especially when accompanied by the attending circumstances above related. The Henry S. Grove (D. C.) 292 F. 502; Morrow v. Wabash R. Co., 219 Mo. App. 62, 265 S. W. 851; The Natal (C. C. A.) 14 F.(2d) 382, certiorari denied 273 U. S. 748, 47 S. Ct. 449, 71 L. Ed. 872; Atlantic Sugar Refineries v. Royal Mail (C. C. A.) 47 F.(2d) 880.
A decree may be presented, and settled on notice, that the libelant is entitled to recover to the extent above stated, and that the cause be referred to a commissioner to ascertain the quantum of damage. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219015/ | NIELDS, District Judge.
This is a libel by Isaac R. Brown, Jr., ancillary administrator of the personal estate of Kirvan S. Phillips, deceased, against Benjamin Donoho and Hiram B. Donoho, as owners of the schooner or motorboat G. W. Glenn, to recover damages for the death of Phillips. It is filed under the provisions of the Merchant Marine Act of 1920, § 33, commonly known as the Jones Act [USCA title 46 § 688], and is based upon the alleged negligence of defendants.
April 14,1930, Phillips, a sixteen year old lad of Cambridge, Md., was employed as a deck hand on the oyster schooner G. W. Glenn by her master, John R. Hardy. The Glenn was over 50 feet long and was equipped with sails, an auxiliary gasoline engine, and another gasoline engine called a “winder” with which to draw the oyster dredges aboard. The crew consisted of four seamen and a cook, including Phillips. The Glenn had been dredging a week and at sunrise on April 23, 1930, sailed from Mahon’s Ditch.back to Silver Bed on Oyster Rock in the Delaware river 1% miles from the Delaware shore. At 9 o’clock that morning the dredges were drawn aboard, and the crew had “early dinner” while the cook at the wheel held the schooner above the oyster bed. The weather was fair, the wind blowing north northwest, the tide ebbing, and the sea rather rough. About 9:2:0 the captain resumed the wheel and was bringing the schooner back for dredging. She was proceeding under full sail in a west southwesterly direction and making six knots an hour. Three of the seamen were on deck trimming oysters. Phillips was shoveling oysters aft on the port side of the schooner, and as he passed the port side of the wooden casing about the winder there was a loud explosion from the exhaust of the winder, and Phillips went over the low rail with his shovel into the river. Captain Hardy at the wheel faced Phillips. With apparent candor he explained the accident on the witness stand in these words: “Well, it could have been an urge of the .sea, or made a misstep, or low railing, and it could have tripped him that way.”
The only life-saving equipment provided by the owner was a lifeboat. As is customary, the lifeboat of the Glenn was suspended from davits overhanging her stem. At the time of the accident it was lashed to a davit so that the stern of the boat could not be lowered into the water. The lifeboat was raised or lowered by operating a rope or davit fall carried through the pulleys of 4 blocks — 2 blocks at the bow and 2 at the stem. At the stern the upper block is hooked to the davit and the lower block is hooked to an eyebolt in the bottom of the lifeboat. This eyebolt in the bottom was missing and a loop of rope had been substituted. The rope loop was insufficient and unsafe. To secure the stem of the lifeboat after it was raised to the davit, the rope or- davit fall was carried through a hole bored in .the lifeboat and then carried around the davit and tied-in a hard or “granny” knot.
With this equipment and a man overboard, Captain Hardy gave the usual alarm. He shouted to lower the jib. He threw a rope to the boy. He joined the three seamen and cook in a futile effort to lower the lifeboat. A seaman at the stem davit obtained a knife from the cook and cut the davit fall. The stem of the lifeboat then dropped within a foot of the water, but a knot in the rope jammed the pulley. With the bQW of the lifeboat in the water and the stem suspended above the water, the boat capsized and a seaman in the boat with difficulty clambered aboard. However, the lifeboat had only half of one oar, so that if she had floated there was no equipment provided for navigating her. The schooner covered 109 yards before the captain headed her about. There was additional delay in lowering the sail and starting the auxiliary engine. Ten minutes elapsed before the schooner was back where the lad went overboard. When asked why it took ten minutes to get back, a seaman testified: “This fooling with the lifeboat and the sails too, and then we had to go down and start the engine.” Meanwhile the “hollering” of Phillips was heard on board the schooner. He was a poor swimmer and was handicapped with very heavy clothing. After keeping afloat for three minutes or longer he sank, and his body was recovered some weeks later. When asked *729whether there was not some one aboard that had the heart to get out after the boy, another seaman testified, “They had nothing to get after him with.”
The libel charges that the death of Phillips resulted from an injury due to “negligence on the part of the respondents, their agents, servants and/or employees” in providing a lifeboat that was defective, improperly carried, and not supplied with adequate oars; in not providing life preservers; and in furnishing a gasoline engine for winding the oyster dredge so defective that “the head blew off and went through the wooden covering” so that one or more pieces of said covering striking the deceased caused him to go overboard. The libel also charges that the Glenn was in.an unseaworthy condition. By their amended answer respondents (1) deny the charge of negligence, and (2) for further answer aver that at the time of the injury to Phillips respondents were not and never had been the beneficial owners of the Glenn, but were only mortgagees out of possession; that John R. Hardy was both master and beneficial owner hiring the crew and having sole use and control of the schooner. Both defenses will receive consideration.
Section 33 of the Jones Act (46 USCA § 688), under which the libel was brought, provides that in case of the death of a seaman, as the result of an injury in the course of his employment, his personal representatives may maintain an action for damages, and in such action, all statutes of the United States conferring or regulating the right of action for death in case of railway employees shall be applicable. The Federal Employers’ Liability Act [45 USCA § 51] is such a statute and provides that every common carrier by railroad shall be liable in damages in case of death of the employee resulting in whole or in part from negligence of any of the officers, agents, or employees of the carrier. The Federal Employers’ Liability Act makes negligence the basis of a railroad’s liability. Section 33 of the Jones Act extends to the personal representatives of a seaman, incurring personal injuries in the course of his employment which result in his death, the rights accorded by federal law to railway employees. Section 33 of the Jones Act is the death statute affording relief to the beneficiaries of a seaman whose death results from an injury occasioned by negligence and suffered within a league of the shore.
Quite recently the Supreme Court has ruled that the Jones Act should be liberally construed. “The rule that statutes in derogation of the common law are to be strictly construed does not require such an adherence to the letter as would defeat an obvious legislative purpose or lessen the scope plainly intended to be given to the measure. * * * The act is not to be narrowed by refined reasoning or for the sake of giving ‘negligence’ a technically restricted meaning. It is to be construed liberally to fulfill the purposes for which it was enacted, and to that end the word may be read to include all the meanings given to it by courts, and within the word as ordinarily used.” Jamison v. Encarnacion, 281 U. S. 635, 640, 50 S. Ct. 440, 442, 74 L. Ed. 1082. “This court has held that the act is to be liberally construed in aid of its beneficent purpose to give protection to the seaman and to those dependent on his earnings.” Cortes v. Baltimore Insular Line, Inc., 287 U. S. 367, 375, 53 S. Ct. 173, 176, 77 L. Ed. 368.
The duty to rescue a seaman overboard is a duty of the ship and of the owner under the general maritime law of the sea. “There is little doubt that rescue is a duty when a sail- or falls into the sea.” Cortes v. Baltimore Insular Line, Inc., supra. “Equally clear is the obligation upon the part of the ship to save the life of a sailor who falls overboard through a misadventure, not uncommon in his dangerous calling. It is absurd to admit the duty to extend aid in the lesser emergency [seaman’s illness], and to deny it in the greater. In both cases, it is implied in the contract that the ship shall use every reasonable means to save the life of a human being who has no other source of help. The universal custom of the sea demands as much wherever human life is in danger. The seaman’s contract of employment requires it as a matter of right.” Harris v. Pennsylvania Railroad Co. (C. C. A.) 50 F.(2d) 866, 868; Salla v. Hellman (D. C.) 7 F.(2d) 953. “There appears to be recognized a further duty on the part of a ship to its sailors, to make all reasonable efforts to rescue them if they fall overboard from any cause whatsoever. And it would appear that this is a not improper extension of the ship’s duty. The very nature of the employment is one subjecting the sailor to grave risk of just such peril, and his helplessness and the master’s ability to protect him, is manifest.” Bohlen’s Studies in the Law of Torts, 312. Mr. Justice Field, charging a' jury in a manslaughter case back in 1864, said: “Now, in the ease of a person falling overboard from a ship at sea, whether passenger or seaman, when he is not killed by the fall, there is no question as to the duty of the commander. He is bound, both by law *730and by contract, to do everything consistent with the safety of the ship and of the passengers and crew, necessary to rescue the person overboard, and for that purpose to stop the vessel, lower the boats, and throw to him such buoys or other articles which can be readily obtained, that may serve to support him in the water until he is reached by the boats and saved. No matter what delay in the voyage may he occasioned, or what expense to the owners may be incurred, nothing will excuse the commander for any omission to take these steps to save the person overboard, provided they can be taken with a due regard to the safety of the ship and others remaining on board. Subject to this condition, every person at sea, whether passenger or seaman, has a right to all reasonable efforts of the commander of the vessel for his rescue, in case he snould by accident fall or be thrown overboard.” United States v. Knowles, 26 Fed. Cas. 800, 802, No. 15,540.
The duty of the ship and owner to rescue a seaman overboard necessarily implies the duty to provide the means of rescue. Normally these means include an effective lifeboat, available life preservers, or life rings. Applying this law to the facts, I find that the owner of the Glenn violated the provision of the Jones Act recited above by neglecting to provide proper means to discharge the duty to rescue Phillips.
It may be objected that the Federal Employers’ Liability Act (45 USCA §§ 51-59) imposes its limitations upon the Jones Act and that the duty to rescue does not apply to railroads. Or it may be obj ected that the duty to rescue a seaman overboard arises from the seaman’s contract of employment; such duty being contractual and not delictual cannot be within the act affording a remedy for negligence. The Supreme Court disposes of both of these objections in the following passages from Cortes v. Baltimore Insular Line, Inc., supra:
“We think the origin of the duty [cure of seaman] is consistent with a remedy in tort, since the wrong, if a violation of a contract, is also something more. The duty, as already pointed out, is one annexed by law to a relation, and annexed as an inseparable incident without heed to any expression of the will of the contracting parties. For breach of a duty thus imposed, the remedy upon the contract does not exclude an alternative remedy built upon the tort. The passenger in a public conveyance who has been injured by the negligence of the carrier, may sue for breach of contract if he will, but also at his election in trespass on the case. • * * We do not read the act for the relief of seamen as expressing the will of Congress that only the same defaults imposing liability upon carriers by rail shall impose liability upon carriers by water. The conditions at sea differ widely from those on land, and the diversity of conditions breeds diversity of duties. * * * There is doubt, and that substantial, whether the administrator of a railroad engineer who by misadventure has fallen from his locomotive while the train is on a bridge has a cause of action under the Federal Employers’ Liability Act (45 USCA §§ 51-59) because of the failure of the crew of the train to come to the rescue of their comrade. Harris v. Penn. R. Co. (C. C. A.) 50 F.(2d) 866, 868. There is little doubt that rescue is a duty when a sailor falls into the sea, United States v. Knowles, 4 Sawy. 517, Fed. Cas. No. 15,540, and that a liability to respond in damages is east upon the shipowners if he is abandoned to his fate. Harris v. Penn. R. Co., supra.
“The act for the protection of railroad employees does not define negligence. It leaves that definition to be filled in by the general rules of law applicable to the conditions in which a casualty occurs. * * * Congress did not mean that the standards of legal duty must be the same by land and sea. Congress meant no more than this, that the duty must be legal, i. e., imposed by law; that it shall have been imposed for the benefit of the seaman, and for the promotion of his health or safety; and that the negligent omission to fulfill it shall have resulted in damage to his person. When this concurrence of duty, of negligence and of personal injury is made out, the seaman’s remedy is to be the same as if a like duty had been imposed by law upon carriers by rail.”
The second defense arises from certain facts not unfamiliar in maritime dealings but somewhat misunderstood after this libel was filed. The records of the Custom House at Wilmington, Del., where she was registered, show that the schooner Glenn was conveyed December 22, 1928, by Z. S. Mears to John R. Hardy for a consideration of $2,800. On the same day a mortgage in like amount was given by Hardy to Mears. August 27, 1929, Hardy reeonveyed the schooner to Mears. On September 6,1929, a satisfaction of the mortgage from Hardy to Mears was recorded, and on November 21, 1929, Mears conveyed the vessel to the respondents, the consideration given in the transfer record in the office of the collector of customs being $5 and other valuable consideration. As to the cireum*731stances under which he became possessed of the schooner, Captain Hardy testified: “I bought her and did not pay for her. I had a mortgage on her. I wanted that mortgage lifted, and he did, and I could not lift it, and I did not have all the money, and I went to Donoho & Son and asked them if they would take this mortgage of $1800., which they did, to save me from losing mine, because I would have lost all, and they simply took a bill of sale on it to protect themselves, and they were in no benefit of the proceeds, I kept the balance of the money, and of course, I was to pay that back.” Hiram B. Donoho, one of the respondents, testified that he loaned $1,800 to Captain Hardy to pay off the mortgage on the Glenn given by Hardy to Mears, such payment being necessary to' save to Hardy the money he had already invested in the boat. “Jack was going to lose his money and that was all that he had in the world and I came to his rescue.” Neither of the respondents engaged Hardy as master, hired any of the crew, furnished any of the food and supplies, or had anything whatever to do with her navigation and operation.
At the time of the accident the schooner was registered in the United States Custom House in Wilmington, Del. Incident to this registration a “Managing Owner’s Oath,” signed “Hiram B. Donoho, Managing Owner,” and verified by him, was filed. This document recites that John R. Hardy “is at present Master” and that the schooner “is wholly the property of citizens of the United States of America owning and residing as follows: Benjamin Donoho, Dover, Delaware, Hiram B. Donoho, Dover, Delaware — Managing Owner.” April 29, 1930, six days after the accident, a “report of casualty” was filed in the Custom House, signed by John R. Hardy. This report gives the name of the master as “John R. Hardy, Little Creek, Del.,” and the names of the owners as “H. B. Donoho and Benjamin Donoho.”
The libel was filed April 13, 1931. April 30, 1931, respondents filed their answer, verified by Benjamin Donoho. The libel having alleged in paragraph 2 that the respondents were “the owners of the auxiliary schooner or motor boat G. W. Glenn,” the answer stated, “As to the allegations of the second paragraph of the said libel, the same are admitted.” The answer concludes: “Wherefore, the said Benjamin Donoho and Hiram B. Donoho, owners of the said Glenn as aforesaid * * * pray that the said libel against them and against the said Glenn be dismissed,” etc. Afterwards and before the ease came on for trial, the respondents by leave of the court filed an amended answer with an affidavit of one of the proctors for respondents. The amended answer admits that the legal title to the schooner “is and was registered in the names of the respondents,” but denies that respondents are “the equitable and beneficial owners” of the vessel. The affidavit of the proctor for respondents attributes the admissions in the first answer to the fact that respondents “did not inform him, until after the said answer had been filed, the said John R. Hardy, master of the ‘Glenn,’ was a gratuitous bailee of him, the said Hiram B. Donoho, and that he had given the said ‘Glenn’ to the said John R. Hardy without consideration for the balance of the oyster season.”
It is clear that the Glenn was transferred to respondents by Hardy as security for a loan of $1,800 by the Donohos to Hardy to pay off a mortgage on the vessel, and that the Donohos took title to the vessel as security for the repayment of this loan. In other words, respondents were mere mortgagees out of possession. It is true that a bill of sale was given to the Donohos by Hardy and recorded and that on the records of the Custom House the Donohos appear as “owners.” But the recording of the bill of sale in the Custom House was necessary whether it was an absolute transfer or as security. There must be some conduct other than the registry of title in their name to estop respondents to deny that they are owners. Morgan’s Assignees v. Shinn, 15 Wall. 105, 21 L. Ed. 87; 24 R. C. L. §§ 100, 101.
The uncontradicted testimony is that Captain Hardy hired the members of the crew, including Phillips, equipped the vessel with food and supplies, received all income from the operation of the vessel, and was at all times in absolute possession and control of her. The proof establishes that Captain Hardy was sole owner of the Glenn.
The libel must be dismissed. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219016/ | McLELLAN, District Judge.
The defendant has filed an answer in abatement and the plaintiff has filed two motions, one entitled “Plaintiff’s Motion in Opposition to Defendant’s Answer in Abatement,” and the other, “Plaintiff’s Motion to Strike out Defendant’s Answer in Abatement.”
The record consists of the writ, the amended declaration, the answer in abatement, the two motions, documentary evidence, and the testimony of two witnesses.
The writ is dated September 3, 1929, and sounds in contract. The amended declaration alleges that the plaintiff filed its return for the year 1918 showing federal income, war profits and excess profits taxes of $7,223,836.-38, which taxes were paid in Mareh, 1919. In April, 1923, an additional tax of $425,446.-72 was assessed and $334,822.51 paid. In February, 1926, the balance was paid by means of a charge against the plaintiff’s overpayment of taxes for another year.
The plaintiff’s present claim is for $334,-822.51, and the larger original claim is mentioned to avoid misunderstanding as to amounts appearing in the exhibits later referred to.
On or about Mareh 14,1924, the plaintiff filed a claim on Treasury Department form No. 843 for the refund of $7,649,283.16, which, among other things, included the following :
“5. The taxpayer is entitled to relief under Sections 327 and 328 of the Revenue Act of 1918 and the regulations relating thereto. A separate application for special relief under these sections has been forwarded to Washington which it is requested be considered with this claim for refund.
“6. The cost of goods sold was greater than the amount stated on the return. »In particular the corporation contends that the market price of cotton and wool fixed by the Department as of December 31, 1918, was greater than the actual market price.
“This claim for refund is filed for the purpose of protecting the taxpayer against the effect of the Statute of Limitations, the exact amount of the overpayment not yet having been determined.
“Before this claim for refund is. disallowed, a hearing before the Department is respectfully requested.”
*739Sections 327 and 328, Revenue Act 1918 (40 Stat. 1093), providing for special relief, read in part as follows:
“See. 327. That in the following cases the tax shall be determined as provided in section 328: * * *
“(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.
“Sec. 328. (a) In the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the ease of a foreign corporation the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations.
“In computing the tax under this section the Commissioner shall compare the taxpayer only with representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances.
“(b) For the purposes of subdivision (a) the ratios between the average tax and the average net income of representative corporations shall be determined by the Commissioner in accordance with regulations prescribed by him with the approval of the Secretary.
“In eases in which the tax is to be computed under this section, if the tax as computed without the benefit of this section is less than 50 per centum of the net income of the taxpayer, the installments shall in the first instance be computed upon the basis of such tax; but if the tax so computed is 50 per centum or more of the net income, the installments shall in the first instance be computed upon the basis of a tax equal to 50 per centum of the net income. In any case, the actual ratio when ascertained shall be used in determining the correct amount of the tax. If the correct amount of the tax when determined exceeds 50 per centum of the net income, any excess of the correct installments over the amounts actually paid shall on notice and demand be paid together with interest at the rate of % of 1 per centum per month on such excess from the time the installment was due.”
It is to be noted that while the foregoing claim for refund stated that the plaintiff was entitled to the relief provided by the foregoing provisions of the Revenue Act of 1918, and referred to a separate application for such relief, the plaintiff also specifically based its claim for refund upon the contention that the cost of goods sold was greater than the amount stated on the return, and upon the contention that the market price of cotton and wool fixed by the Department as of December 31, 1918, was greater than the actual market price.
On or about December 30,1924, the Commissioner of Internal Revenue wrote the plaintiff substantially as follows:
“An examination of your income tax returns for the taxable years 1918 and 1919, together with the information heretofore submitted, has been made and the results thereof are outlined in the attached statement and accompanying schedules.
“Reference is made to the requests contained in your claims dated March 11, 1924, that your profits taxes for the years 1918 and 1919 be computed under the provisions of sections 327 and 328 of the Revenue Act of 1918.
“Before consideration can be given your requests, there must be a final determination of your net income for the years in question. It will, therefore, be necessary for you to advise this office within thirty days from the date of this letter of your acquiescence in the determination of the net income disclosed *740in schedules 1 and 3, or exceptions, if any, which you may take thereto.”
The above letter refers to the same paper heretofore stated to have been filed on or about March 14,1924.
On or about January 10, 1925, the plaintiff wrote the Commissioner of Internal Revenue, acknowledging receipt of the letter of December 30, 1924, and stating: “Pacific Mills hereby agrees to the determination of net income for the years 1918 and 1919 as set forth in said letter, namely, $12,386,889.-20 for 1918 and $7,109,921.35 for 1919, for the purpose of determining income and excess profits taxes for those years under Sections 327 and 328 of the Revenue Act of 1918. It is again requested, before any decision is reached denying special assessment under the foregoing sections, that the corporation be granted an opportunity to be heard before the Commissioner of Internal Revenue in Washington.”
The plaintiff presented during the trial numerous requests for findings .of fact and rulings of law, and in order to give the plaintiff an opportunity to save its rights, I continued the trial until this third day of October, 1933.
The first four requests for findings, except that portion of the third as to a refusal by the Commissioner to consider the contentions set forth in the claim, were granted.
In its eleventh request, which was denied, the plaintiff sought a finding or ruling that the Commissioner’s letter of December 18, 1925, is not a rejection of the plaintiff’s contention in regard to the valuation of its wool inventory, said contention having been mutually waived and abandoned before the Commissioner would consider the said claim of March 14, 1924.
This letter, so far as material, is substantially as follows:
“Reference is made to your corporation income and profits tax return for the years 1918 and 1919.
“After careful consideration and review and an examination of all the facts submitted, your application under the provisions of Section 327 for assessment of your profits tax under Section 328 of the Revenue Act of 1918 has been denied for the reason that no abnormality affecting either your capital or income has been disclosed which would bring your ease within the scope of paragraph (d) of Section 327. Furthermore, the audit of your ease discloses no exceptional hardship evidenced by gross disproportion between the tax computed without benefit of Section 328 and the tax computed by reference to the representative corporations specified in that section.
“The tax liability for each of the years 1918 and 1919, as determined in Bureau letter dated December 30, 1924, is therefore sustained.
“In accordance with the above conclusions, your claim for the refund of $7,649,283.10 for the year 1918 will be rejected in full, and your claim for the refund of $1,487,736.15 and credit of $90,624.21, aggregating $1,578,360.-36 for the year 1919 will be rejected for $1,-485,603.46.
“The Collector of Internal Revenue for your district will be officially notified of the rejection at the expiration of 30 days from the date of this letter.”
I think the foregoing letter is to be construed as showing an intention to reject the whole claim filed March 14,1924, which claim, as heretofore stated, provided in the sixth paragraph thereof: “The cost of goods sold was greater than'the amount stated on the return. In particular the corporation contends that the market price of cotton and wool fixed by the Department as of December 31, 1918, was greater than the actual market price.”
The claim of March 14, 1924, was actually rejected for the full amount for which it was filed, and the rejection listed on rejection schedule No. 4638, signed by the assistant to the Commissioner on February 10, 1926.
I was requested by the plaintiff to find that the plaintiff was never at any time notified that its claim of March 14, 1924, had been officially rejected on February 10, 1925, (request No. 12), and I so find; but, as heretofore stated, the plaintiff was notified that such claim would be rejected. It seems to me of no importance, so far as the issues here presented are concerned, whether the plaintiff was notified of the rejection of its claim after the rejection had been officially scheduled. Where the Commissioner notifies the taxpayer by letter that his claim will be rejected and the rejection is not officially scheduled, such letter constitutes a rejection. Daily Pantagraph, Inc., v. United States (Ct. Cl.) 37 F.(2d) 783; New England Mutual Life Insurance Co. v. United States (Ct. Cl.) 52 F.(2d) 1006. Where, as in the case at bar, the taxpayer is notified that his claim “will be rejected,” and the rejection is scheduled, the statute of limitations runs from the *741date the rejection, is scheduled. Savannah Bank & Trust Co., v. United States (Ct. Cl.) 58 F.(2d) 1068.
As stated in United States v. Michel, 282 U. S. 656, at pages 659 and 660, 51 S. Ct. 284, 285, 75 L. Ed. 598, referring to Revised Statutes, § 3226, as amended (26 USCA § 156) the applicable statute in the case at bar:
“There is nothing in the legislative history of the provision to indicate an intention that the two-year period should not commence upon the disallowance of the claim or that it should be extended by the failure of the Commissioner to give the specified notice.
“Having regard to the rule of strict construction to be applied to waivers by the United States of its sovereign immunity from suit, the clause reasonably may be read merely as a direction to the Commissioner to send the notice to claimant without making the failure so to do have the effeet of enlarging the period for suing as otherwise definitely prescribed.”
On March 26, 1927, the plaintiff filed a claim which alleged as a ground for refund that: “The taxpayer contends that its closing inventory of wool for the year 1918 should be valued at the British issue prices rather than at the figures fixed by the Department. If this were so, the reduction of inventory and income for the year 1918 would result in a reduction of tax considerably larger than $425,446.72, which is the amount of additional tax paid for the year 1918 on April 4, 1923, or less than four years prior to the filing of this claim for refund.”
In this claim for refund the plaintiff asked for a conference before the claim was rejected. The plaintiff was given an opportunity for such a conference and did not have the evidence necessary to substantiate the facts set forth in the claim. Accordingly, no hearing was held. See the testimony of Bartlett Harwood, Esq.
On or about the 27th of June, 1927, the Commissioner wrote the plaintiff, in substance, as follows:
“An examination of your claim for refund in the amount of $425,446.72 of corporation income and profits taxes for the year 1918 has been made. The claim is based upon the contention that taxpayer’s inventory should be valued at British issue prices rather than at the figures fixed by the Department.
“Data submitted in connection with this claim does not substantiate taxpayer’s contention for the reason that it is shown British issue prices do not enter into taxpayer’s inventory for the year 1918.
“You will be allowed ten days within which to submit other information. If no reply is received at the end of this time, it will be presumed that you do not wish to pursue the matter further, and the claim will then be rejected on the next schedule to be approved by the Commissioner.”
The claim was rejected on September 8,, 1927, and according to Mr. Harwood, who was then acting as counsel for the plaintiff, nothing further was done until this action was. brought.
Section 3228 of the Revised Statutes, as amended by section 1112 of the Revenue Act of 1926 (26 USCA § 157 and note), and section 3226 of the Revised Statutes, as amended by Revenue Act 1926 § 1113 (a) (26 USCA § 156) provide:
“See. 3228. (a) All claims for the refunding or crediting of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty alleged to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected must, except as provided in sections 284 and 319 of the Revenue Act of 1926, be presented to the Commissioner of Internal Revenue within four years next after the payment of such tax, penalty, or sum.
“Sec. 3226. Ho suit or proceeding shall be maintained in any court for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected until a claim for refund or credit has been duly filed with the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. Ho such suit or proceeding shall be begun before the expiration of six months from the date of filing such claim unless the Commissioner renders a decision thereon within that time, nor after the expiration of five years from the date of the payment of such tax, penalty, or sum, unless such suit or proceeding is begun within two years after the disallowance of the part of such- claim to which such suit or proceeding relates. The Commissioner shall within 90 *742days after any such disallowance notify the taxpayer thereof by mail.”
This action was brought after the expiration of five years from the date of the payment of such portion of the tax as the plaintiff: now seeks to recover. Accordingly, the action cannot be maintained unless the suit was begun within two years after the disallowance of the claim to which this suit relates.
The plaintiff relies upon the rejection of its elaim for refund filed in June, 1927, and rejected on September 8, 1927. This action was brought within two years of such rejection, but as I view it, the plaintiff’s difficulty is that substantially the same elaim had been made and rejected at a prior time and more than two years before suit brought. The situation presented in the case at bar is not unlike that in B. Altman & Company v. United States (Ct. Cl.) 40 F.(2d) 781, where it was held that a elaim for refund having been filed, and no suit having been brought within two years from its rejection, the court had no jurisdiction of a suit based on a second claim for refund specifying the same grounds as the first claim. A distinction between the Altman Case, in which certiorari was denied by the Supreme Court of the United States, and the ease at bar is that in the former case the second claim for refund was filed after the expiration of the two-year period from the date of rejection, while in the case at bar it was filed within the two-year period from the date of rejection. This appeals to me as a distinction without a difference.
It is urged that the case at bar is to be distinguished from the Altman Case because in the latter case the claims were for the same amount and in almost identical language, and because both claims conformed to the statute and regulations. It seems to me that I ought to deal with this question as a matter of substance and not of form; not concern myself with identity of amounts or language, but look to see whether or not, in the ease at bar, substantially the same elaim was made and rejected as was made later.
The plaintiff urges that the earlier elaim was waived and abandoned. I think there is quite as good ground for saying that the second elaim was waived. See the reference to Mr. Harwood’s testimony, supra. Be this as it may, I am not satisfied that the earlier elaim was waived. It was rejected and no action based on such rejection was brought within two years, or at any other time.
The plaintiff’s fifth, sixth, seventh, eighth, ninth, tenth, eleventh, thirteenth and fourteenth requests for findings of fact were denied because as to portions of them they are not supported by the record, while as to other portions they are immaterial to the issue presented by the answer in abatement and the motions.
Of the plaintiff’s requests for rulings of law, the first was granted, and the second, third, and fourth were denied. The fifth request was denied because, while as there indicated the relief by way of special assessment is discretionary and not subject to review, the plaintiff had sought in its claim for refund not only special relief, but claimed also substantially the same thing as appeared in its second claim. Each claim for refund complained of overvaluation of its inventory.
The plaintiff’s eighth request for a ruling that the defendant is estopped from reliance upon the statute of limitations because no notice of rejection was given by the Commissioner was denied upon the authority of the cases cited supra.
The plaintiff’s other requests, numbered 6, 7, and 9, are denied as either inapplicable or unwarranted.
The answer in abatement is sustained, and the plaintiff’s motions in opposition thereto and to strike out the answer in abatement are denied. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219017/ | WOOLSEY, District Judge.
This motion to set aside purported service of process, subpoena in an Equity Cause on defendant Morgan Lithograph Company is granted.
The statement in the affidavits of Vernon Chamley and E. S. Gaylor, Jr., submitted for the defendant which has appeared specially, to the effect that the Morgan Lithograph Company went into federal receivership in equity in Ohio, Northern district, on June 22, 1933, that Mr. Chamley was appointed receiver, and that when Gaylor was served with the subpoena herein on June 23, 1933, he was employed by the receiver and not by the company are not challenged, and it is hard to see how they could be successfully challenged. This renders any reference to ascertain facts unnecessary, for those facts thus established preclude any personal jurisdiction of the company herein, for the subpoena was not served on an agent thereof. Feder v. A. B. Fiedler & Sons et al. (C. C.) 116 F. 378, 379.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219019/ | BOURQUIN, District Judge.
Title 28 USCA §§ 571, 572, prescribe by way of costs, an attorney’s fee of $2,0 to the successful party on final hearing in equity (Id. §§ 830, 831), that costs be taxed after proof of the items in the cost bill contained and Rule 70 of this court, that the bill shall be timely filed, failing which all costs save the clerk’s shall be deemed waived.
The United States now informs the court that for some years and in some hundreds of suits involving Volstead nuisances in its cost bill it has included only $10 of such fee; and it asks leave to amend all said bills to include the balance of said statutory allowance.
It is very clear that, were the movant a private suitor, the request would be denied for that, to say nothing of the expiration of the term in many instances, whatever was not included in the cost bill was waived by virtue of the rule aforesaid.
And so must it be here denied, for that the United States in court as a litigant has no more rights and privileges and is subject to the same rules as any other litigant, be the latter the humblest accused in the land. The rule of good purpose and necessary in behalf of timely and efficient administration of justice is consistent with the statutes and valid. Order accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219020/ | JOHNSON, District Judge.
The petitioner in this case filed his petition for a writ of habeas corpus directed to the warden of the Northeastern Penitentiary, wherein he alleges that he is illegally restrained of his liberty by the sentence of the court, which was without power to sentence him.
A rule to show cause why the writ should not issue was granted, and the petitioner with his counsel appeared before this court. The respondent filed an answer praying that the petition be denied, and at the hearing was represented by the assistant United States attorney.
From the petition and proofs submitted at the argument, it appears that the petitioner was indicted on March 12, 1929; in the United States District Court for the Southern District of New York, on two counts; the first count charging him with smuggling certain merchandise into this country in violation of section 593 (a) of the Tariff Act of 1922 (19 USCA § 496), and the second count charging him with concealing certain merchandise which had been imported into the United States in violation of section 593 (b) of the Tariff Act of 1922 (19 USCA § 497).
On March 26, 1929, the petitioner entered a plea of guilty, and was sentenced to imprisonment for a term of three weeks on count 1 of the indictment, and for a term of one year and one day in the United States Penitentiary at Atlanta, Ga., on count 2 of the indictment. The execution of the sentence on count 1 was suspended, and the execution of the sentence on count 2 was stayed pending further order of the court. On April 9; 1929', the sentence under count 2 was suspended and the prisoner ordered to leave the United States within two weeks.
On March 10,1933, the defendant, apparently not having complied with the order of the court directing him to leave the country, a bench warrant was issued, and on March 14, 1933, the defendant was arraigned before the same court, and was sentenced to imprisonment in the United States Northeastern Penitentiary, at Lewisburg, Pa., for a term of one year and one day on count 2 of the indictment to run consecutively -with sentence on count 1, which has already been served.
At the hearing before this court, counsel for the petitioner contended that because section 725 of title 18 of the U. S. Code in paragraph 2 (18 USCA § 725, par. 2) provides that a probation officer may arrest the probationer at any time after the probation period but within the maximum period for which the defendant might originally have been sentenced, and since the maximum sentence which could have been imposed in this ease was two years on each count, the sentencing court was without jurisdiction to resentenee the defendant on March 14, 1933.
The probation law has no relevancy here. Hansen was not placed on probation, nor does the record show that he was rearrested by a probation officer. In any event the maximum sentence which could have been imposed on the defendant was four years, two years under count 1 and 2 years under count 2. He was sentenced the first time on March 26,1929, and the second time on March 14, 1933, less than four years after the first sentence.
Nor can this ease be decided under the principles as announced by the Supreme Court of the United States in the case of Joseph F. Miller, Petitioner, v. A. C. Aderhold, Warden, 288 U. S. 206, 53 S. Ct. 325, 77 L. Ed. 702, decided February 6, 1933, as contended by the United States attorney, because that case was one, where, after a plea of guilty, the court suspended indefinitely any imposition of sentence.
In the case at bar the court imposed the sentence of imprisonment for one year and one day and then suspended its execution upon the condition that the defendant leave the country within two weeks. There are numerous decisions of the state courts holding that'a court having power to make an order suspending the execution of its judgment in criminal cases necessarily, upon violation of such order, has the power to revoke the same and to enforce the original judgment by commitment; and such right is not im*750paired or limited by the passing of the term in which such suspension is made. 16 Corpus Juris, § 3141; and see the following cases cited therein: State v. Drew, 75 N. H. 402, 74 A. 875; Ex parte Bates, 20 N. M. 542, 151 P. 698, L. R. A. 1916A, 1285; People v. Monroe County, Court of Sessions, 141 N. Y. 288, 36 N. E. 386, 23 L. R. A. 856; People v. Trombly, 173 App. Div. 497, 160 N. Y. S. 67, 35 N. Y. Cr. R. 75.
This state of the law leads to the inquiry whether the federal courts have the power to make an order suspending the execution of sentence after it has been imposed. No statute has been found conferring this authority upon the federal courts except the Probation Act of March 4, 1925, 43 Stat. 1259 (18 USCA §§ 72A-727). This act (section 1 [18 USCA § 724]) provides that courts “shall have power, after conviction or after a plea of guilty or nolo contendere for any crime or offense not punishable by death or life imprisonment, to suspend the imposition or execution of sentence and to place the defendant upon probation for such period and upon such terms and conditions as they may deem best.”
Apparently the sentencing court did not invoke the power conferred by the Probation Act because the defendant was not placed on probation. However, a determination o”f this question is unnecessary at this time because, if it is conceded that the sentencing court did not have the power to suspend the execution of the sentence, that fact did not render the original sentence of imprisonment for one year and one day invalid, and the court could enforce its judgment of sentence even after the expiration of the term at which it was imposed.
In the ease of Morgan, Warden, v. Adams, 226 F. 719, the Circuit Court of Appeals of the Eighth Circuit held that an order made by a federal court without statutory authority, suspending in whole or in part, during good behavior, or for an indefinite time, a sentence of fine and imprisonment does not invalidate the sentence, and the court may enforce such sentence after the expiration of the term at which it was imposed.
In the case at bar, the sentencing court, when it resentenced the defendant on March 14,1933, to imprisonment for the same length of time as that imposed by its original sentence, was merely revoking the order suspending the first sentence, and was legally enforcing its original sentence.
And now, October 11, 1933, after hearing on the petition for a writ of habeas corpus, rule, and answer, it appearing from the petition itself that the petitioner is not entitled to a writ of habeas corpus, it is ordered that the petition be, and the same is hereby, dismissed, and the rule granted thereon discharged. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219022/ | CHESNUT, District Judge.
The adjudication in bankruptcy occurred on January 11,1933. The bankrupt had been engaged in conducting a restaurant at Annapolis, Maryland. At the time of the adjudication there was on record what purported to be a valid chattel mortgage on the fixtures of the bankrupt’s business place in the amount of $3,000 in favor of one' Steve Foundas, which had been duly executed and recorded July 20,1932.
Shortly after the adjudication these fixtures were sold by the receiver to the said Steve Foundas for $325 subject to the chattel mortgage, and were subsequently removed from the premises. Steve Foundas has also filed claim on a judgment note for $1,500 dated July 20,1932, on which judgment was later recorded in Anne Arundel County.
In due course a trustee in bankruptcy was appointed and on April 24,1933, on the basis of information shortly theretofore received, filed a petition to rescind the sale and to avoid the mortgage as a fraudulent conveyance under United States Code, Title 11, § 110 (e) which provides that:
“The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication.”
An answer thereto was filed by Steve Foundas and the questions raised by the petition and answer were referred to the referee (Daniel M. Murray) to hear, determine and report. By amendment to the petition the trustee also attacked the mortgage on the ground that it was not a duly authorized corporate act.
The referee heard the evidence of numerous witnesses for the respective parties and also argument of counsel, and considered elaborate typewritten briefs filed by them with him. By his report filed June 2-9,1933, (now the subject of the petition for review) the referee concluded as a matter of fact that the mortgage had been given pursuant to a fraudulent scheme entered into by and between the mortgagee and the majority of the officers, directors and stockholders of the bankrupt to hinder, delay and defraud creditors in that the only consideration for the mortgage of $3,000 was an advance of $255 and that at the time of the giving of the mortgage the bankrupt was indebted to numerous persons without apparent ability to pay and there was in contemplation by the parties a subsequent bankruptcy and a re-opening of the business by practically the same parties with the use of the same fixtures after title thereto had been obtained through the color of the fraudulent mortgage encumbrance. The referee also found that the giving of the $1,500 judgment note was without consideration and a part of the same general fraudulent scheme. Thereupon the referee passed an order “that the chattel mortgage and the confession judgment note aforesaid be and the same are hereby vacated, and the sale of the property purported to be covered thereby set aside, and all claims of the said Steve Foundas against the bankrupt estate dismissed and the said Steve Foundas or the person now in possession thereof is directed to return to the bankrupt the fixtures and chattels mentioned in this petition, or the appraised value thereof.”
The extended oral testimony heard by the referee has not been stenographically reported but has been summarized very fully in the referee’s report. This is in accordance with General Order No. 27 in Bankruptcy (11 USCA § 53), which reads as follows:
“When a bankrupt, creditor, trustee, or other person shall desire a review by the judge of any order made by the referee, he shall file with the referee his petition therefor, setting out the error complained of; and the referee shall forthwith certify to the judge the ques*754tion presented, a summary of the evidence relating thereto, and the finding and order of the referee thereon.”'
See to the same effect Rule 5 of this Court of the Bankruptcy Rules, page 69, reading as follows:
“In certifying to the court questions covered by the petition to review, the referee shall include in his findings of fact a summary of the testimony on which such findings are based and shall then give his conclusions of the law.”
It should be noted that the order of the referee, setting aside the sale and vacating the mortgage, makes no provision for the return of the cash consideration paid to the bankrupt estate by Steve Foundas as purchaser of the property subject to the mortgage; and likewise no allowance is made for the sum of $255 admitted to have been advanced by Foundas at or before the execution of the mortgage. In addition thereto it was agreed by counsel at the hearing on the petition to review that Steve Foundas had paid the sum of $213 to redeem a part of the fixtures bought by him from the receiver from a superior lien, the return of the particular chattels having been authorized by order of court, or in lieu thereof a payment to the lien claimant of $213. And it further appeared that certain of the chattels covered by the mortgage and receiver’s sale to Foundas had been reclaimed and returned to the original vendors by due authority in the administration of the estate. The appraised value of these last named articles was $1,409 or more. Counsel for the trustee concede that he is not entitled to the return of these last mentioned articles which Foundas has in fact not received and therefore the appraised value thereof is properly to be deducted from the appraised value of all the articles covered by the sale and the chattel mortgage, leaving the gross appraised value of the articles to be returned $1,899.50. Counsel for Steve Foundas, however, contend that if he elects to pay the appraised value of the articles instead of returning them in kind, there should be a further deduction of the items above mentioned of (a) $255 cash advanced prior to the making of the mortgage; (b) $325 paid to the receiver as the purchase price and (e) $213 paid to redeem one of the articles from a superior lien.
The dominant contention urged on the petition for review is that the referee’s finding of fact that the mortgage was fraudulent in fact to the knowledge and with the participation 'of the mortgagee is not sustained by the evidence. In passing on this question attention should be called to General Order in Bankruptcy No. 47 (11 USCA § 53), as recently amended by the Supreme Court (effective September 1, 1932) which reads as follows:
“The reports of referees in all eases and proceedings in bankruptcy shall be deemed presumptively correct, but shall be subject to review by the court, and the court may adopt the same, or may modify or reject the same in whole or in part when the court in the exercise of its judgment is fully satisfied that error has been committed: Provided, That when any matter is referred by consent of all parties in interest and the intention is plainly expressed in the consent order that the submission is to the referee as an arbitrator, the court may review the same only in accordance with the principles governing a review of an award and decision by an arbitrator.”
It is not contended that this reference was to the referee as an arbitrator. But it is to be noted that the report of the referee is to be deemed “presumptively correct” and is to be modified or set aside only when the court in the exercise of its judgment is “fully satisfied that error has been committed.” This rule thus formally and authoritatively promulgated by the Supreme Court is in effect a restatement of the rule and practice as it has been currently understood and applied in this District and in other districts heretofore. Collier on Bankruptcy (13th Ed.) vol. 1, pp. 966-972. In the case of In re Bresnan, 45 F.(2d) 193, 194, Judge Coleman, for this Court, said:
“However, if the referee’s findings on questions of fact are based upon a review of conflicting evidence or involve weighing the credibility of witnesses, they are entitled to very great weight, and will not be rejected or disregarded by the court unless manifestly erroneous. Free v. Shapiro (C. C. A.) 5 F.(2d) 578.”
Recent cases in the Circuit Court of Appeals of this Circuit to the same general purport are: Beneke v. Moss, 46 F.(2d) 948; Gross v. Tierney, 55 F.(2d) 578, 581; Willis v. Blue Ridge Bank (C. C. A.) 15 F.(2d) 848; Baer v. Security Trust Co. (C. C. A.) 32 F.(2d) 147.
I have carefully reviewed the testimony as summarized by the referee and have considered the oral and written briefs of counsel commenting on its effect. In the language of the amended General Order No. 47, I am not fully satisfied that the referee is in error in his conclusion of fact with regard to the *755fraudulent character of the mortgage. The testimony is conflicting and the conclusion of fact dependent very largely upon the credibility of the witnesses. The crucial question was whether the consideration for the mortgage therein recited was in fact given by the mortgagee to the bankrupt. On behalf of the mortgagee it was said that cash aggregatin $4555 had in fact been advanced by the mortgagee to the bankrupt over a period of several months in varying amounts and on numerous different occasions. None of the payments were made by check although the mortgagee had several bank accounts; and at no time was any written receipt given for any of the sums asserted to have been advanced. The only written evidence of any kind of the advances were rather informal notations made in a small memorandum book by the mortgagee’s secretary, the probative force of which was deemed by the referee to have been successfully overcome by testimony on behalf of the trustee. There was no satisfactory evidence to trace any of the alleged advances, with the exception of the admitted amount of $255, into the bank account of the bankrupt or otherwise into its possession. Two of the three active officers of the bankrupt specifically denied that any sum beyond $255 had been advanced by the mortgagee, while the third officer of the bankrupt and the mortgagee testified positively to the advances having been made in the aggregate amount of $4555. It is apparent that in the absence of any satisfactory written evidence of the amount of the advances, the conclusion of fact was directly dependent upon the credibility of the witnesses in connection with other faets and circumstances of the ease. The finding of fact by the referee was therefore not based merely on his inferences from admitted facts but was largely dependent on his estimate of the credibility of the respective witnesses. This is, therefore, a typical ease where the finding of faets by the referee, who saw and heard the witnesses, should not be set aside where it is based, as it was here, upon at least substantial affirmative evidence.
In view of this finding of fact by the referee his conclusion of law that the mortgage must be vacated was entirely correct. It is, therefore, unnecessary to consider the contention urged on behalf of the trustee that the mortgage as made was not an authorized corporate act, by reason of the failure of the directors to formally approve it as required by the by-laws.
The referee’s finding of fact also justifies his conclusion of law that the claim on the confessed j'udgment note should be disallowed. And the order was also proper in setting aside the sale by the receiver to Foundas. While there was no proof of additional affirmative fraud on the part of Foundas with respect to the purchase from the receiver, nevertheless the referee apparently found that his original fraudulent intent with respect to the acquisition of the property still existed and this was concealed by him from the receiver who obviously would not have made the sale under authority of the eourt if the true faets had been known. Indeed I do not understand counsel for Foundas to contest the propriety of the referee’s order in vacating the receiver’s sale if the finding that the mortgage was fraudulent is to be confirmed.
Counsel for Foundas do, however, contend that upon the vacation of the mortgage and setting aside of the sale, provision must be made to credit or refund to Foundas the three items of disbursement made by him as above mentioned. The referee’s order allowed none of the credits. It is necessary to consider them separately as they fall into different categories.
As to .the item of $255 admittedly advanced at the time of the giving of the mortgage, I am clearly of the opinion it cannot be allowed either as a secured or an unsecured claim in view of the referee’s finding of actual fraud as distinct from merely constructive fraud on the part of the mortgagee. Strike v. McDonald & Son, 2 Har. & G. (Md.) 191, 261; Bagby’s Annotated Code of Maryland, art. 39B, §§ 9 (2), 11, Uniform Fraudulent Conveyance Act; In re Friedman (D. C. Wis.) 164 F. 131, 143; In re Hugill (D. C. Ohio) 100 F. 616; Burt v. C. Gotzian & Co. (C. C. A.) 102 F. 937, certiorari denied 179 U. S. 684, 21 S. Ct. 916, 45 L. Ed. 385; 79 A. L. R. 133.
But the situation is materially different with regard to the item of $325 paid by Foundas as purchaser of the property from the receiver. The ordinary rule is that when a sale is avoided by the vendor he must return the consideration received. In opposition, counsel for the trustee in bankruptcy relies on the doctrine that aetual fraud against creditors on the part of the grantee will dis-entitle him to any credits for betterments to the property conveyed or for sums expended in paying the taxes or in paying off liens or encumbrances. Milwaukee & M. T. Co. v. *756Soutter, 13 Wall. 517, 20 L. Ed. 543; Irving Trust Co. v. Finance Service Co. (C. C. A. 2) 63 F.(2d) 694; 8 A. L. R. 527, 529, 543, note. The reason for the rule, which is an equitable one, is that the transfer is void and the creditors are entitled to retake the property as they find it, and equity will not aid a partieeps eriminis. But while this rule, by the weight of authority including federal decisions, is very generally applied, yet as an equitable doctrine it is not absolutely inflexible and has not been invariably applied under all conditions. 27 C. J. 674; Milholland v. Tiffany, 64 Md. 455, 2 A. 831; Chatterton v. Mason, 86 Md. 236, 37 A. 960; Jackson v. Ludeling, 99 U. S. 513, 25 L. Ed. 460; Ladd v. Perry (C. C. A. 7) 28 F.(2d) 975. Compare Irving Trust Co. v. Finance Service Co. (C. C. A. 2) 63 F.(2d) 694, 696. And no case has been called to my attention which applied the rule to the situation that we have here. This item of $325 was not paid by the mortgagee to improve the property for his own benefit but to acquire it from the bankrupt estate, and the money was not expended on the property but paid to the receiver. The sale was, of course, made under the authority of an order of court and the money paid to an officer of the court. It seems to me entirely inequitable, and beneath the dignity of the court, to permit the bankruptcy estate to retain this money when the sale is set aside by order of court. In my opinion, therefore, the item of $325 must be returned by the trustee to the purchaser if the property is surrendered.
There is perhaps more doubt as to the proper disposition of the purchaser’s claim for credit for the item of $213 paid to redeem one of the chattels from a conditional vendor who had a superior lien claim. Here the money was paid by the mortgagee to discharge a prior encumbrance and therefore would seem possibly to be within the ordinary operation of the rule, but I think there is a sufficiently distinguishing circumstance in that the money was not paid by the mortgagee while in possession of the property but under an order of court to obtain its possession. During the administration of the bankruptcy proceedings the prior lien claimant asserted his right to re-take the property and the official representative of the creditors was ordered by the court to return the chattel not to the mortgagee but to the lien claimant, or in lieu thereof, pay the amount of his claim; and thereupon the amount was paid by Foundas to discharge the encumbrance. The result will be that when the goods are re-taken by the trustee the bankruptcy estate will have received a benefit to the extent of the payment without consideration unless the item is refunded to Foundas. "In substance and effect the sum so paid by him was an increase in the purchase price and should be logically treated in the same way as the item of $325 above discussed.
The referee’s order required the purchaser to “return to the bankrupt the fixtures and chattels mentioned in this petition, or the appraised value thereof.” After deduction of the value of certain chattels reclaimed under superior title and which Foundas therefore did not receive, the appraised value of the remaining articles as agreed by counsel is $1,-899.50. The referee’s order does not take these articles into account but it is the agreement of counsel that credit for them must be given as against the appraised value of the chattels. With this understanding the effect of the referee’s order is to require the return of the articles received by Steve Foundas under the sale, or the payment to the bankruptcy trustee the appraised value thereof, to wit, $1,899.50.
The order should be modified to the extent of providing that if the articles are returned by Foundas to the trustee, there shall contemporaneously be refunded to Foundas by the trustee the sum of $538 consisting of (a) the purchase price of $825 paid to the receiver and (b) the sum of $213 paid by Foundas to exonerate a particular chattel from a superior claim. But if Foundas retains the articles he must pay the bankruptcy trustee the sum of $1,899.50 with interest at six per cent, from April 24, 1933, as claimed by the trustee. Of course the trustee will not be obliged to accept the return of the articles unless they are in a condition substantially as good as when previously delivered to Foundas. Impairment of value, if any, by reason of removal from the premises where originally installed is, however, I think, not chargeable to Foundas, as it was a necessary incident of the sale to him.
Except as so modified the referee’s findings and order are confirmed. Counsel should confer and if possible agree upon the form of order to be prepared and submitted in conformity herewith. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219024/ | McLELLAN, District Judge.
This is a suit for infringement brought against the defendant, Silver-Brown Company, by Francis B. Sheridan and William A. Jacobson, joint patentees under United States patent, No. 1,669,790, dated May 15, 1928, for a stocking protector. There is also a counterclaim in which the defendant seeks costs and an account of profits accrued to the plaintiffs and damages sustained by the defendant, because of the alleged infringement by the plaintiffs of United States patent, No. 1,418,855, for a heel lining for repairing shoes, issued June 6, 1922, to H. F. Weston, and now owned by the defendant.
The stocking protector shown in patent No. 1,669,790 is formed of two pieces of material such as leather; the base being shaped to conform substantially with the bottom of a heel, being rounded at its rear end. The side section is of elongated form and tapers from the central portion along curved lines to its opposite ends where the opposite edges intersect and meet in points. The upper edge is curved throughout its length, and the lower edge, which is stitched to the outer edge of *760the bottom section, is also curved throughout its length, but the curvature of the bottom edge is on a somewhat longer radius than the curvature of the upper edge. Both curvatures are, however, contiguous and uniform throughout their entire lengths.
This patent has for its objects: The production of a stocking protector that, by reason of its shape (the rear portion of the upper edge inclined forwardly over the base portion so as to force the side portions outwardly as shown in Fig. 1 of the patent drawing), when placed upon a heel, the rear portion is brought into a substantially vertical position and the side portions are drawn inwardly until both sides of the upper edge are turned inwardly so as to firmly grip and cling tightly to the heel of the wearer, thereby protecting the stocking against wear and tending to prevent the shoe from slipping.
The claims of the patent, three in number, on all of which the plaintiffs rely, read as follows:
“1. A stocking protector comprising two pieces of flexible material secured together, one constituting a base and the other a side wall of an article in which the rear of the side wall normally inclines forwardly and overlies the base and the lateral portions of the side wall bow outwardly from the base and when the rear portion of the side wall is moved to a substantially vertical position about its line of attachment to the base, the lateral portions of the side wall are drawn upwardly and their upper edges turn inwardly so as to overlie the base for tightly gripping the sides of the heel of a wearer.
“2. A stocking protector comprising two pieces of flexible material secured together, one constituting a base and the other a side wall, of an article in which the rear of the side wall normally inclines forwardly at an angle of substantially 45 degrees and overlies. the base and the lateral portions of the side wall bow outwardly from the base and when the rear portion of the side wall is moved to a substantially vertical position about its line of attachment to the base the lateral portions of the said wall are drawn upwardly and their upper edges turn inwardly so as to overlie the base for tightly gripping the sides of the heel of a wearer.
“3. A stocking protector comprising a base substantially conforming to the bottom of a heel of a wearer, and a lateral section having an upper and a lower edge both of which are curved, the lower edge being stitched to the edge of the base to produce an article in which the rear portion of the side section normally inclines forwardly and overlies the base and the lateral portions of the side section bow outwardly away from the base.”
The defendant concedes the infringement of patent No. 1,669,790, if the patent is valid. Therefore, the only issue is whether the defendant’s contention is correct that the Sheridan patent is invalid as anticipated by United States patent, No. 1,418,855, to Weston for a heel lining, in view of the prior art, particularly United States patent, No. 1,122,-884, to Eliason for a heel guard. The prior art patents and publications offered by the defendant disclose nothing to support the defendant’s theory of want of invention in the patent in suit beyond what appears in the above-mentioned patents to Weston and Eliason.
The Weston patent discloses a heel repair lining comprising a heel seat and a counter portion with a curved lower edge which, when it is secured to the heel seat, makes the counter portion at an acute angle to the seat at the rear thereof. This heel lining is intended to be used in repairing shoes and is so shaped as, when stitched or otherwise fastened into the shoe, to fit naturally and smoothly into the concavity of the shoe without stretching or manipulation, and without wrinkling or curling of the edges. The heel lining 'can be made to fit any style of shoe by varying the amount of curvature on the lower edge of the counter portion. This heel lining was not intended by the inventor, nor adapted, to lock to the heel of the wearer and protect the stocking. It does not anticipate the patent in suit. Topliff v. Topliff et al., 145 U. S. 156, 12 S. Ct. 825, 36 L. Ed. 658.
Patent No. 1,122,884 to Eliason discloses a heel guard to be loosely applied to the inside of a shoe. The exterior of the guard is made of a material which will freely slide against the shoe, and the inner walls of the guard are made of a material which will adhere more or less to the stocking of the wearer. The object is to prevent chafing of the heel and wear on the stocking. The construction shown is a rigid and permanently shaped article made to fit the heel of the shoe, and there is no movement between the parts to permit automatic locking or gripping of the sides to the heel of the wearer, as shown in the Sheridan patent.
The defendant urges that there is no patentable difference between a heel lining and a *761stocking protector; the difference being one of terminology only. A stocking protector designed for the purpose of preventing wear on the heel of the stocking and unattached to the shoe differs radically from a heel lining attached to the inside of the shoe as a permanent part thereof for the purpose of repairing the shoe; there is a fundamental and definite difference between the articles in purpose and use.
The simplicity of the device does not require the conclusion that it does not involve invention and is a mere exercise of mechanical skill. Expanded Metal Company v. Bradford, 214 U. S. 366, 29 S. Ct. 652, 53 L. Ed. 1034; Diamond Rubber Company v. Consolidated Rubber Tire Company, 220 U. S. 428, 31 S. Ct. 444, 55 L. Ed. 527.
The utility of the device shown by the patent in suit has been established by the evidence. Moreover, it is not open-to attack by the defendant. Where infringement is clearly shown, or admitted, the defendant is estopped from asserting lack of utility. Gandy v. Main Belting Company, 143 U. S. 587, 12 S. Ct. 598, 36 L. Ed. 273; Lehnbeuter v. Holthaus, 105 U. S. 94, 26 L. Ed. 939.
The evidence shows and I find that the stocking protectors made according to the patent in suit have met with considerable commercial success. “As bearing on the novelty of the plaintiff’s invention, the manner in which the public adopted it and their competitors copied it, weighs heavily in the favor of its patentability.” Trico Products Corporation v. Apco-Mossberg Corporation, 45 F.(2d) 594, 598 (C. C. A. 1st Circuit.)
Statements of fact in this opinion are to be taken as findings of fact, and statements of legal conclusions as rulings of law, under the equity rules.
The patent, No. 1,669,790, is valid and has been infringed by the defendant as to all three claims.
It follows that the device constructed according to the Sheridan patent does not infringe the patent, No. 1,418,855, to Weston, relied upon by the defendant in its counterclaim.
The plaintiffs axe entitled to the relief prayed for in their bill of complaint, and to dismissal of the defendant’s counterclaim, and decrees may be entered accordingly. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219025/ | GALSTON, District Judge.
Harry Spielberger, one of the bankrupts, seeks to review an order of the referee which requires him to turn over to the trustee the books and records of the bankrupts used in their business prior to the filing of the petition in bankruptcy.
It is contended that the order should be reversed because it fails to appear from the proofs that Harry Spielberger, at the time of *762the entry of the order, had possession of the hooks and records or that they were under his control.
The bankrupts were engaged in the manufacture of bows for shoes and slippers. Isidore Spielberger is the father of Harry Spielberger. They were associated in business for about twelve years, during the first six of which the enterprise was known as that of I. Spielberger, and during which time the son was employed by the father. Then the firm succeeded the individual business, and Harry Spielberger became a partner.
On November 6, 1931, Harry Spielberger executed and delivered to a committee of the New York Credit Men’s Adjustment Bureau, Inc., a general assignment for the benefit of creditors. On December 7,1931, an involuntary petition in bankruptcy was filed. On December 28, 1931, an order of adjudication was entered.
Harry Spielberger testified that his father had taken the books of account from the place of business of the bankrupts some time prior to the making of the general assignment. The testimony as to the time of the disappearance is far from satisfactory. It would not be otherwise important were it not that it affords one of the circumstances out of which an inference is sought to be drawn as to whether the books and records were taken by the father by arrangement with the son. At first Harry Spielberger testified that his father disappeared on or about September 15, 1931. At a subsequent hearing before the special commissioner under the 21-A examination, he changed the date to some time around the middle of October. This later date cannot be reconciled with the statement of the bankrupt that he had last seen the books on the Tuesday preceding the general assignment. That day would be November 3, 1931. So that if we assume the latter date to be the correct date of the disappearance of the books, and if the son saw the books for the last time when the father carried them away, then it must follow that the son saw the father as late as November 3, 1931.
Now it is contended that though Harry Spielberger was held out to the.public as a partner, he was in point of fact not a partner, but received a salary and commissions. If this were true, it would have a bearing as to the power or control of the son over the possession or custody of the books. The contention is of little weight because there were so many things that happened in the conduct of the business which lead to a contrary view. He had power to sign checks. It is true that he said that as to this power he was limited to $200 or $300 a week; but there is no evidence that notice of any such limitation was issued, for example, to the Bank of Manhattan. He kept the books, and not only prepared the financial statement filed with the National Credit Office, Inc., but signed it on March 4, 1931. So too, as has been stated above, it was he who executed the general assignment for the benefit of creditors. This was done in the absence of his father and without, as he contends, knowledge of his father’s whereabouts.
One is driven to the conclusion that he was a partner with authority to act in all matters.
The certificate of the referee sets forth his unfavorable impression of the witness as to bearing and manner throughout the proceeding, as that “of one determined to pursue a policy of negation as long as possible, confident in the belief that if a final showdown was necessary, he could eseape any disagreeable consequences by revelation of matters claimed to have been lately discovered.”
This apparent reluctance to aid, the bankrupt explains on the ground that his relationship with his father was strained. His parents had been divorced some years before the filing of the petition in bankruptcy and he was not on visiting terms with his father. But whatever the social status may have been, the fact remains that they continued in business together.
It appears that during the months of September and October, merchandise in a considerable amount and of the value of approximately $20,000 was purchased. No adequate, explanation is given of the alleged sales or disappearance of most of this merchandise. In the regular conduct of their business, invoices were received for goods purchased and sales memoranda made of all sales. Neither the invoices nor the sales memoranda were produced.
But the only question to be determined is: Were the books and records in the bankrupt’s possession or control when the referee made the turnover order? In other words, was the bankrupt physically able to comply with the requirements of the order? See In re Goldman (C. C. A.) 62 F.(2d) 421; Coates v. Dresner (C. C. A.) 34 F.(2d) 264, 265.
In the latter case a turnover order for one of the books of a partnership was issued against both partners. One of the partners subsequently disappeared. In answer to the motion to punish for contempt made against *763the other partner, he asserted that he was unable physically to obey the order. The Circuit Court of Appeals wrote:
“We think that, in a contempt proceeding against him alone, he should be heard to say, in explanation of his seeming disobedience, that, wholly without regard to past events, he has had neither possession of nor control over the hook since the order was entered and therefore cannot alone obey it. * * *
“On the evidence in the case the original offense was joint and so, accordingly, was the order; and a contumacious violation of the order might also be joint; but one of the respondents acting alone might conceivably be rendered unable by the other to produce it alone and in that situation he should not be punished for what now he cannot do.”
See, also, Southern Rock Island Plow Co. v. Florence (C. C. A.) 29 F.(2d) 397; Sinsheimer v. Simonson (C. C. A.) 107 F. 898.
In Oriel v. Russell, 278 U. S. 358, Chief Justice Taft said at page 362, 49 S. Ct. 173, 174, 73 L. Ed. 419: “We think a proceeding for a turnover order in bankruptcy is one the right to which should be supported by clear and convincing evidence. The charge upon which the order is asked is that the bankrupt, having possession of property which he knew should have been delivered by him to the trustees, refuses to comply with his obligation in this regard. It is a charge equivalent to one of fraud, and must be established by the same kind of evidence required in a case of fraud in a court of equity. A mere preponderance of evidence in such a ease is not enough. The proceeding is one in which coercive methods by imprisonment are probable and are foreshadowed. The referee and the court in passing on the issue under such a turnover motion should therefore require clear evidence of the justice of such an order before it is made.”
Accordingly, however unwilling one may be to accept the testimony of Harry Spielberger, nevertheless the fact remains that the father did disappear. He was not served with the bankruptcy process, and the trustee offered no proof of his whereabouts. The son may have been in error and may indeed have testified falsely as to when his father disappeared and as to when he saw the books last; but strain as one can, it seems unwarrantable to conclude that the bankrupt, Harry Spielberger, either had possession of the books and records or had them under control at the time of the entry of the turnover order.
In the absence of such proof, the foregoing authorities cited would seem to require' a reversal of the order.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219027/ | GALSTON, District Judge.
Both the bankrupt and the objecting creditor move in respect to the referee’s report. The bankrupt seeks to reverse because specification No. 1 was sustained by the referee; the opposing creditor seeks to have that part of the report confirmed, but reversed as to specification No. 2.
The first specification charges that the bankrupt failed to keep books and records of his financial transactions from which creditors could ascertain his financial condition; the second, that the bankrupt made an assignment to his wife of insurance commissions within four months preceding his bankruptcy, with intent to hinder, delay, and defraud his creditors.
The bankrupt was an insurance broker engaged in soliciting insurance of all kinds, but particularly life, fire, automobile, and boiler insurance. Up to the time of the suspension of business of the Bank of the United States, he had maintained a bank account in that institution. He did not have canceled cheeks nor cheek stubs that had been used for the period immediately preceding the closing of the bank. He had no record to show what his income was for the year 1930 nor for 1931.
The only book of account that he was able to produce was one relating to insurance other than life insurance, covering items from April, 1932, to the time that the petition in bankruptcy was filed in May, 1932. Although this type of book had been maintained for a year and a half prior thereto, none of the earlier books was produced. He had no books at all from which his financial condition could be ascertained for the years 1930, 1931, and 1932. Nor did he produce a copy of his income tax return for 1932.
It abundantly appears from the testimony of the witness Sloane, an insurance broker, that one engaged in general insurance brokerage should maintain hooks and records for the reason, among others, that renewals become due and records are required of insurance *767which customers place. Secondly, it is desirable at times to get three months’ time within which to pay premiums, and, moreover, customers not infrequently make installment payments of premiums. There is in addition cancellation of policies effected; and in general books should be kept.
Under the present amendment of 1926 (Bankr. Act § 14, as amended [11 USCA § 32]), it is not necessary that proof be afforded of an intent to conceal the bankrupt’s position so long as his failure was not “justified under all the circumstances.” The bankrupt here was in a line of business which at least, so far as it was concerned with insurance other than life, required the maintenance of books; that is to say, the calling in which the bankrupt was engaged would in itself warrant the belief that books should have been kept, and indeed the bankrupt testified that that had been done, and in consequence there must be some significance given to his failure to produce those prior to March, 1932. Certainly, with obligations outstanding, some in the form of notes to banks, it was exceedingly important for the bankrupt to maintain records from which his financial condition could be ascertained. Karger v. Sandler (C. C. A.) 62 F.(2d) 80.
I think, therefore, specification No. 1 was properly sustained.
On February 29, 1932, the bankrupt assigned to Rena Low, his wife, commissions from the Equitable Life Insurance Company. There had been a previous assignment to her on January 13, 1931, subject to a prior assignment on January 13,1930, in favor of the National City Bank of New York.
That the wife had independent means seems reasonably clear, and that she assisted her husband by loans is also proved by the evidence. As to that specific assignment which was made within two months of the bankruptcy, it would appear to have been at least preferential, but apparently was not fraudulent.
The records of the Equitable Assurance Company reveal that $350 was paid by virtue of the assignment to the wife for the period from January 1,1932, to May 20,1932. During the same period, Rena Low advanced for his account moneys greatly in excess thereof from her own means. The distinction between a preference and a transfer contemplated within section 14b of the Bankruptcy Act, subdivision 4, 11 USCA § 32 (b) (4), is pointed out in Van Iderstine v. National Discount Co. (C. C. A.) 174 F. 518.
Accordingly, the report is likewise sustained as to the dismissal of the second specification.
Settle order on notice. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219028/ | ANDREW M. J. COCHRAN, District Judge.
This suit is before me on plaintiff’s motion to strike out the answer of the defendant. It is a suit in equity seeking to recover an assessment of the par value of 100 shares of the capital stock of the City-National Bank of Knoxville, Tenn., owned and held by the defendant amounting to $10,000. The bank was declared insolvent, and plaintiff was appointed its receiver by the Comptroller of the Currency on March 9, 1932. An assessment was made of the par value of all of its stock by the Comptroller March 29, 1932.
The answer contains seven paragraphs. *768It admits that on the hooks of the bank at the time of the failure the defendant was registered as the owner of 100 shares of its capital stock. It acquired 50 shares April 1, 1912, by gift, and 50 shares by purchase March 1, 1929. The defendant was created a corporation under the name of Williamsburg Institute by an act of the Legislature approved April 6, 1888 (Loc. & Priv. Acts 1887-88, c. 896) whieh was amended by an Act approved May 14,1890, chapter 1517, Loc. & Priv. Acts 1889-90. April 25, 1913, its name was changed to Cumberland College. The business of the corporation as provided by this legislation was that of the establishment and maintenance of an institution of learning at Williamsburg, Ky., in which was to be taught all the branches usually taught in colleges and other like institutions, and it was to be under the control of the trustees who were to be controlled in their action by the principles and doctrine of the denomination known as the Missionary Baptist.
But two defenses are set up in the seven paragraphs of the answer, which differ merely in the way the defenses are alleged. One is that the defendant had no power to acquire the stoek. The other is that it owns and holds the property as a trustee.
On the question of power, it is not necessary to follow the reasoning of defendant and the authorities cited to support it. This is because it is evident that the defendant had express power to acquire the stoek. It is empowered “to take and hold property of any sort by purchase, gift, bequest or devise.” This is sufficient to cover the 50 shares of stoek acquired by gift in 1912. It is further empowered to “make any investment of its funds from time to time whieh is authorized by law.” This covers the acquisition of the 50 shares acquired by purchase in 1929. That purchase is also covered by the first provision. And the retention of the first 50 shares as an investment is also covered by the second. Something further should be said as to the second provision in elucidation of it. The investment of its funds thereby authorized is one that is “authorized by law.” By this is meant that it has the same authority to invest its funds that a trustee has. By section 4706, Kentucky Statutes, it is provided that persons or corporations holding funds in a fiduciary capacity for loan or investment may “invest the same * * * in such other * * * dividend paying securities as are regarded by prudent business men as safe investments.” By section 614, Kentucky Statutes, it is provided that the funds of a trust company “may be invested in such manner as the directors deem prudent and safe.” In this state stocks of state and national banks in good standing have always been regarded as prudent and safe investments. Of course this notion has received quite a shock during the present depression, but it still stands. That such an investment is regarded as prudent and safe is recognized by legislation. By section 2223a-8 it is provided that investment companies may invest its reserve fund and capital stock in the “stock of any incorporated bank or trust company of this state and of the national banks of this state or of any other state in the United States.” And by section 625 it is provided that the “capital stock and accumulations of all insurance corporations may be invested * * * in the stocks of incorporated state banks and trust companies and of national banks of this state and other states of the United States.”
It is therefore evident that the acquisition and holding of the 100 shares of stock in question by the defendant was within its powers and lawful.
The other defense is based on section 66, title 12, USCA. The case does not come within that provision. The stock was not registered on the books of the bank in the name of the defendant as trustee but in its individual name. If it can be said that it held its property in trust, it was not a trustee within the meaning thereof. The trustees contemplated are similar to executors, administrators, and guardians, i. e., who hold for the use and benefit of definite cestuis que trustent.
A direct authority against this contention of defendant is to be found in the case of Davis v. First Baptist Society, Fed. Cas. No. 3633. None of the eases cited and relied on by the defendant are in point and need not be distinguished. Then, if it does come within that provision, this is a suit in equity, and defendant’s assets can be subjected therein to the assessment.
The motion to strike is sustained. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7219029/ | OTIS, District Judge.
A brief preliminary statement will help to an understanding of the issues involved in this case.
It appears that on September 2,1859, one David L. J ones, being then a resident and citizen of the state of Kentucky, executed an instrument in writing wherein he conveyed a life estate in certain Kentucky lands to his son, James H. Jones, then also a resident and citizen of Kentucky, with remainder to the children and the descendants of James H. J ones. It was further provided in this instrument that James H. Jones might at any time he desired “sell said land — provided he will reinvest the proceeds in other lands, the title so made to vest the life estate in himself, remainder to his heirs as hereinabove named.”
In 1870 James H. Jones purchased in Missouri certain lands situate in Platte county from one Levy J. Waller and Evaline Waller, his wife, taking from them a warranty deed conveying absolute title in fee simple to the lands in question. James H. Jones continued in the possession of these lands until his death in 1894. The lands consist of 155.03 acres in one farm, and are the subject-matter of the present controversy.
James H. Jones died testate. His last will and testament was duly probated in the probate court of Platte county on April 16, 1894. By the terms of his will he devised a life estate in the Platte county farm to his son, William Z. Jones, and he provided in his will that, if William Z. Jones should die without children surviving him, the farm should go in fee simple to two of the nephews and a niece of James H. Jones, the testator.
William Z. Jones died July 23,1927, leaving no children or descendants. His widow, Junie E. Jones, one of the defendants herein, upon the death of William Z. Jones, entered into the possession of the Platte county farm, and has since been, and is now, in possession of that farm, excepting that she has leased the farm to her codefendant, Walter Anderson, who is in possession as a tenant. Junie E. Jones claims title in fee simple to the farm by virtue of the last will and testament of William Z. Jones, by which he purported to devise the Platte county farm in fee simple to his wife, said Junie E. Jones.
After the death of-James H. Jones in 1894, to wit, in 1895, William Z. Jones instituted a proceeding in the circuit court of Platte county in which proceeding said nephews and niece of James H. Jones were named as parties defendant, service by publication being had upon them, in which proceeding a decree was entered by the circuit court of Platte county, finding and adjudicating that James H. Jones purchased the Platte county farm with the proceeds of the sale of lands in Kentucky, conveyed to him in 1859 by his father, David L. Jones, and that, by the terms of the conveyance in 1859, the farm purchased in Platte county was impressed with the trust created by that conveyance; that therefore James H. Jones had only a life estate in the Platte county farm; that the will purporting to convey the remainder to his nephews and niece was to-that extent void; and that William Z. Jones, upon the death of James H. Jones, took an absolute title to the farm in Platte county.
The Questions in the Case.
As appears from this preliminary statement, the questions involved in this controversy are two:
(1) The question whether the claims of the Kentucky devisees in the will of James H. Jones (they and their heirs and legatees are the plaintiffs here) are res adjudicata by reason of the proceeding and decree in the Platte county circuit court.
(2) If the decree in the Platte county circuit court is not binding upon the plaintiffs here, has it been proved that the Platte county farm, purchased by James H. Jones from *770Levy J. Waller and Evaline Waller, Ms wife, was purchased with proceeds of the sale of the Kentucky lands which had been conveyed to James H. Jones by David L. Jones so as to be impressed with the trust created by David L. Jones and so that James H. Jones had only a life estate in the Platte county farm.
Finding's of Fact.
I make the following findings of fact:
(1) I find the facts to be as stipulated between the parties in Plaintiffs’ Exhibit 3.
(2) I find the fact to be that on September 3,1859, David L. Jones executed the conveyance of certain lands and other property in Kentucky, and that Defendants’ Exhibit D is a true and óorreet copy of that conveyance.
(3) I find the fact to be that on January 20, 1870, Levy J. Waller and Evaline Waller, Ms wife, conveyed the Platte county farm, herein referred to, by warranty deed to James H. Jones, and that Plaintiffs’ Exhibit 1 is a true and exact copy of that deed..
(4) I find that on several occasions during his lifetime, and wMle he had possession of the Platte county farm, James H. Jones and his wife executed deeds of trust upon the said Platte county farm, purporting to convey absolute title thereby, and that during the lifetime of James H. Jones no question was raised by any one that he had only a life estate in the said Platte county farm.
(5) I find that James H. Jones died testate in 1894, and that Plaintiffs’ Exhibit 2 is a true and exact copy of Ms last will and testament by wMch he devised the Platte county farm to his son, William Z. Jones, for life, the remainder to James H. White and Overton Jones, nephews of James H. Jones, and Mary Jones, niece of James H. Jones; and I further find that plaintiffs in this ease, as heirs and legatees of said nephews and Mece, succeeded to all of their right, title, and interest, if any, in the Platte county farm.
(6) I find that William Z. Jones died without children or other descendants surviving, and I further find that he died testate, devising the Platte county farm to his wife, then defendant Junié Jones, and that she has ever since been in possession (either by herself, or. by her tenant, defendant Walter Anderson) of the said Platte county farm.
(7) I find the fact to be that a certain proceeding was instituted in the Platte county, Mo., circuit court on August 24, 1895, by William Z. Jones and Fannie Jones, his wife, wherein James W. WMte, Overton Jones, and Mary Jones were named as defendants; that Defendants’ ExMbit G is a true and correct copy of the petition in that proceeding and of the order of the Platte county circuit court that service be had upon the defendants hy .publication. I further find that Defendants’ ExMbit C is a true and correct copy of the order of publication and of the publisher’s certificate thereof, and that Defendants’ ExMbit B is a true and exact copy of the decree of the circuit court of Platte county in the said proceedings.
(8) I further find that it has not been proved in this case by the defendants herein that the Platte county farm was purchased with the proceeds of the sale of the lands in Kentucky, wMch were conveyed in 1859 to James H. Jones by Ms father, David L. J ones, and, absent such proof, I find the fact to be that the Platte county farm was purchased by James H. Jones with funds wMch were not impressed with any trust whatsoever.
(9) I find that there is no competent evidence in tMs case upon which to base any findings as to the reasonable rental value of the Platte county farm since the death of William Z. Jones and while it has been in the possession of the defendants.
The Law of the Case.
In view of the findings of fact which I have made, it is apparent that only one question, that a question of law, remains for decision. That question is this: As a matter of law, is the decree of the Platte county circuit court conclusive as against the claims of the plaintiffs here?
No contention is made by the plaintiffs that the decree of the Platte county circuit court would not be binding upon them merely because service was had by publication. Their contentions are that the decree was not within the issues raised by the pleadings in the Platte county circuit court, nor witMn the notice contained in the order of publication and in the publication. There can be no question that, to be binding upon these plaintiffs and those from whom they claim (the defendants named in the proceeding in the Platte county circuit court), the decree must have been within the pleadings and within the notice. It is necessary, therefore, to consider what was the relief prayed for in the petition in the Platte county circuit court and what was the notice published by reason of the order of publication.
The petition in the Platte county circuit court alleged conveyance of Kentucky lands *771by David L. Jones to James H. Jones in 1859; alleged that those lands were conveyed by James H. Jones for his life, the remainder to others; alleged that he was authorized to sell such lands and to invest the proceeds in other lands, taking the title thereto, subject to the same provisions; alleged that he sold the Kentucky lands and invested the proceeds thereof in the Platte county farm; alleged that he had only a life estate in said Platte county farm, but that he purported to devise the remainder in said real estate at the termination of his life estate; that he devised it to James W. White, Overton Jones, and Mary Jones, nephews and a niece; and prayed that, “said real estate in Platte County should be held in the same tenure, subject to same conditions as land originally conveyed by David L. Jones to James H. Jones and with proceeds of the sale, of which sale Platte County land was bought, and it should be impressed with the same trust and within and under the same limitations as was prescribed in the said deed.”
The order of publication and publication made pursuant thereto set out in substance all of the allegations of the plaintiffs’ petition and set out also the prayer for relief in that petition contained.
Upon the final hearing of the ease in the Platte county circuit court, that court found as a fact that the Platte county farm was purchased with the proceeds of the sale of the Kentucky lands, conveyed in 1859 to James H. Jones; that he took the Platte county farm subject to the same conditions and limitations; that he had only a life estate in that farm. It was adjudged and decreed “that so much of the said will of James H. Jones, deceased, as seeks to convey the lands here in controversy be set aside and held for naught and that the title in fee simple to said lands is declared and adjudged to be and vested in plaintiff, W. Z. Jones, subject, however, to the widow’s dower, to the one-third part of the same.”
In the order of publication, there was not one word referring to any will of James H. Jones or to any attack upon that will or to any attack on the claim of the nonresident defendants arising out of such will. Even if they had seen the publication, they would have had no knowledge therefrom that the validity of the -will under which they had claims was attacked. That being true, it is clear that so much of the decree as declared the will of James H. Jones null and void was not binding upon the nonresident defendants.
It is said, however, by the defendants in this case that, although that part of the decree purporting to declare void the will of James H. Jones may not be binding upon the plaintiffs here, nevertheless that part of the decree which declared that James H. Jones had only a life estate in the Platte county farm is binding upon the plaintiffs; that so much of the decree at least was within the pleadings and the publication and is sufficient to defeat plaintiffs’ present action.
I think this contention cannot be sustained. It is elementary that due process of law requires notice and a chance to be heard. That one living in Kentucky has notice by reason of an order published in a small country newspaper in Missouri is, of course, the baldest fiction. How often has use been made of this legal fiction to accomplish fraud 1 Certainly if a court must assume that a published notice has eome to the attention of one named in it as a defendant it will not assume that he has been notified of what the notice does not advise him.
We cannot assume that the defendants named in the notice had any knowledge that their uncle left a will, or that, if he did, they were named as beneficiaries, as devisees of his Platte county farm. Their only claims to the Platte county farm depended on that will. The notice here did not advise them of the will, that they were named in it, or of any other basis whatsoever of any claims on their part to the farm in Missouri. It did not even suggest that they had or had asserted any claims. They were named as defendants, but what were they called upon to defend against? They had no interest in the question, the only question suggested in the notice — whether James H. Jones had only a life estate in the Platte county farm. Whether his estate was for life or in fee simple was nothing to them, his nephews and his niece. Even if they saw the notice, why should they undergo expense and effort to employ counsel to go out from Kentucky to Missouri, to litigate a point that to them, so far as the notice advised them, was purely academic?
Eor purposes of greater clarity, consider a supposed ease such as:
X owns (or thinks he owns) a valuable work of art, let us say, a painting. In his 'will he bequeaths that painting to Y, living in a distant state. Upon the death of X, Z, claiming title to the picture, brings suit against the executor of the estate of X. He names Y as eodefendant, obtains service on Y by publication, but says nothing, either in his petition or in the notice of publication, about the will or any basis for any claim by *772Y. Of what significance to Y is such a notice? None whatever. The notice to which he is entitled is notice that some claimed rights of his are to be litigated.
The Missouri statute governing orders of publication (now section 739, R. S. Mo. 1929 [Mo. St. Ann. § 739]) requires that the notice shall state “briefly the object and general nature of the petition.” Obviously this is to the end that the nonresident defendant may know what relief is sought as against him, may have some idea what his interest is, how it is to be affected. The requirement is not satisfied by a notice which in effect says to the nonresident defendant, as does the one here: “You are made a defendant in this action, but as against you no cause of action is stated in the petition, against you no relief is prayed, there is no suggestion that you have any interest to protect.”
Declaration of Law.
Upon the facts found, I declare the law to be that the plaintiffs are the owners in fee simple of the lands involved in this controversy and entitled to possession of them.
To this declaration of law defendants are allowed an exception.
The defendants have asked for certain findings of fact and declarations of law. To the extent facts have not been found and declarations of law have not been given as so requested (the requested findings and declarations are incorporated herein by reference), the defendants are allowed exceptions.
Objections to evidence made by the defendants at the trial and not then ruled on are overruled, and defendants are allowed exceptions.
Counsel for plaintiffs will prepare and submit an appropriate judgment entry. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224470/ | MEMORANDUM
MALACHY E. MANNION, District Judge.
Frank DeBartolo is a survivor of September 11, 2001 attack on the World Trade Center in New York City, more commonly referred to as “the 9/11 attacks.” After living through those traumatic events, he struggled to maintain work for the next ten years. He did not work a full five-day week from September 2001 through his alleged onset date of June 4, 2010, despite numerous accommodations by his previous employer. Between July 2010 and March 2012, Mr. DeBartolo was treated by Dr. *407Bruce Snyder, MD, a licensed psychologist. During their weekly meetings, Dr. Snyder catalogued and recorded Mr. De-Bartolo’s continuing struggles with post traumatic stress disorder (PTSD) and depressive disorder, not otherwise specified. The plaintiff suffered from symptoms such as depression, preoccupied thoughts, anxiety, impaired memory, and poor social judgment. He also discussed conflicts with his wife and children that sprung from his continued psychological struggles.
Mr. DeBartolo applied for Social Security disability insurance benefits (DIB) alleging he became disabled on June 4, 2010. After submitting evidence to and testifying before an Administrative Law Judge (ALJ), he was only awarded benefits starting on September 22, 2011. He now appeals that unfavorable portion of the ALJ’s decision. The court finds the ALJ improperly weighed the medical evidence of record with regard to the plaintiffs severe mental impairments. The ALJ’s decision is therefore unsupported by substantial evidence of record. There is abundant evidence that establishes Mr. DeBartolo had marked limitations in both his activities of daily living and his abilities to maintain concentration, persistence, and pace. As such, the court finds that Mr. DeBartolo became disabled on June 4, 2010 and reverses the ALJ’s decision. The court will direct the Commissioner of Social Security to award DIB from June 4, 2010.
I. PROCEDURAL BACKGROUND
The record in this action, (Doc. 7), has been reviewed pursuant to 42 U.S.C. § 405(g) to determine whether there is substantial evidence to support the Commissioner’s decision denying the plaintiffs claim for Disability Insurance Benefits (“DIB”) under the Social Security Act, (“Act”). 42 U.S.C. §§ 401^433, 1381-1383f. The plaintiff, Frank DeBartolo, filed his initial application for DIB on May 4, 2011. (TR. 197). That application was denied six weeks later and the plaintiff requested a hearing before an ALJ. (TR. 114-119). The ALJ conducted a hearing on April 2, 2012 where she took testimony from the plaintiff and a vocational expert. (TR. 44). On July 24, 2012, the ALJ issued a decision finding the plaintiff became disabled on September 22, 2011. The ALJ denied the plaintiffs request for benefits between June 4, 2010 and September 22, 2011. (TR. 21-43). The plaintiff requested review by the Appeals Council, but they denied his request, thereby making the ALJ’s decision the final determination of the Commissioner. (TR. 1-6).
The plaintiff filed his complaint challenging the ALJ’s determinations and findings on December 6, 2012. (Doc. 1). He filed his brief in June 2013, (Doc. 12), and the defendant filed her brief on July 12, 2013. (Doc. 13). The plaintiff subsequently filed a reply brief. (Doc. 14). The case is now ripe for the court’s ruling.
II. STANDARD OF REVIEW
When reviewing the denial of disability benefits, the court must determine whether the denial is supported by substantial evidence. Brown v. Bowen, 845 F.2d 1211, 1213 (3d Cir.1988); Johnson v. Commissioner of Social Sec., 529 F.3d 198, 200 (3d Cir.2008). Substantial evidence “does not mean a large or considerable amount of evidence, but rather such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Pierce v. Underwood, 487 U.S. 552, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); Hartranft v. Apfel, 181 F.3d 358, 360 (3d Cir.1999), Johnson, 529 F.3d at 200. It is less than a preponderance of the evidence but more than a mere scintilla. Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971).
*408To receive disability benefits, the plaintiff must demonstrate an “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. § 432(d)(1)(A). Furthermore,
[a]n individual shall be determined to be under a disability only if her- physical or mental impairment or impairments are of such severity that she is not only unable to do her previous work but cannot, considering her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy, regardless of whether such work exists in the immediate area in which she lives, or whether a specific job vacancy exists for her, or whether she would be hired if she applied for work. ' For purposes of the preceding sentence (with respect to any individual), “work which exists in the national economy” means work which exists in significant numbers either in the region where such individual lives or in several regions of the country.
42 U.S.C. § 423(d)(2)(A).
III. DISABILITY DETERMINATION PROCESS
A five-step process is required to determine if an applicant is disabled under the Act. The Commissioner must sequentially determine: (1) whether the applicant is engaged in substantial gainful activity; (2) whether the applicant has a severe impairment; (3) whether the applicant’s impairment meets or equals a listed impairment; (4) whether the applicant’s impairment prevents the applicant from doing past relevant work, and; (5) whether the applicant’s impairment prevents the applicant from doing any other work. 20 C.F.R. §§ 404.1520, 416.920.
Here, the ALJ determined that claimant has severe impairments including Post Traumatic Stress Disorder (PTSD), depressive disorder not otherwise specified, chronic obstructive pulmonary disease (COPD), asthma, arthralgia, myalgia and myositis, and fibromyalgia. The ALJ concluded the plaintiff was not disabled for the period between June 4, 2010 and September 22, 2011 and retained the residual functional capacity (“RFC”) to perform light, unskilled work, with certain nonexer-tional limitations, and that therefore he was not disabled for that period of time under 20 C.F.R. § 404.1520(g). However, the ADJ further concluded that as of September 22, 2011, the plaintiff became disabled. (Tr. 28-39).
IV. THE ALJ’S DECISION
Using the above-outlined procedure, the ALJ found that plaintiff met the insured status requirements of the Act through December 31, 2015, and that plaintiff had not engaged in substantial gainful activity since June 4, 2010, the alleged onset date. The ALJ found that plaintiff has severe impairments noted above, but that between June 4, 2010 and September 22, 2011,’ the plaintiff did not have an impairment or combination of impairments which met or medically equaled the severity of the listed impairments of 20 C.F.R. Part 404, Subpart B, Appendix 1. The ALJ found that the plaintiff had the RFC to perform light work, with the nonexertional limitations that the work be unskilled, consist of simple, routine, repetitive tasks with only occasional changes in work setting, involve only occasional interaction with supervisors, co-workers, and the public. The plaintiff was further limited to only occasional balancing, bending, stooping, crouching, crawling, kneeling, climbing, *409and pushing/pulling with his lower extremities. Finally, the plaintiff should avoid concentrated exposure to temperature extremes, humidity, wetness, fumes, odors, dust, gases and poor ventilation, vibrations, and hazards such as moving machinery and unprotected heights.
The ALJ also determined that plaintiff has no past relevant work experience, that he was born on February 12, 1959, and was 53 years old as of the date of the decision, making him a “person closely approaching advanced age” under 20 C.F.R. § 404.1563. The ALJ additionally found that plaintiff has a high school education and can communicate in English, that transferability of his job skills is not an issue because he does not have past relevant work experience, that jobs which he can perform exist in significant numbers in the national economy, and that he was not disabled as defined by the Act from June 4, 2010 through September 22, 2011, but became disabled as of that latter, date. (Tr. 28-39).
V. EVIDENCE OF RECORD
The plaintiff has -a high school education with two years of college, and previously worked as a chief of communications and project manager for the New York City municipal government. (Tr. 89, 226). He lives with his wife, who does not work due to disability, and two teenage sons, ages sixteen and eighteen. (Tr. 49). He claims he could not work starting on June 4, 2010 because he was suffering from physical pain and mental/emotional distress. Before that, he worked continuously for 33 years. (TR. 70). Many of his problems stem from his involvement in the 9/11 attacks in New York City. (TR. 35).
The plaintiff testified before the ALJ and gave details about his limitations. He noted that he used to help with chores around the house, but cannot do so any longer. He has issues with concentration and memory, especially remembering events that just happened. He also used to be an avid reader, but can no longer read for work or pleasure. (Tr. 61). When his sons were younger he was involved in the boy scouts and was a scout master, but stopped participating years ago. (TR. 62). He also does not have any hobbies.
Before he stopped working, his former employer allowed him to keep a cot in his office so he could rest and recover during the workday when needed. (Tr. 73). Between September 11, 2011 and the date of the alleged onset, the plaintiff did not work a full five-day week. He was forced to use his vacation and sick time to compensate for his missed work. (Tr. 53). He would take long weekends to try and recover from the pain caused by headaches and breathing problems. (Tr. 72).
Starting on July 1, 2010, he was treated by Dr. Bruce E. Snyder, M.S., a treating licensed psychologist. (TR. 387). Dr. Snyder notes indicate the plaintiff was feeling regretful, slept approximately 5 hours per night, and was having dreams about the 9/11 attacks. He was also easily startled by planes and construction. Dr. Snyder’s notes are extensive and encompass seventy-two weekly meetings that occurred over the span of approximately seventeen months. In his decision, the ALJ selectively pointed to eleven of those sessions starting on April 7, 2011 and ending on April 15, 2012, but failed to address or even discuss the other 61 appointments.
The July 2010 sessions include notations indicating the plaintiff was anxious and stressed.2 He was having dreams and viv*410id memories of the 9/11 attacks. He was also tearful when speaking about these thoughts, claiming that similar situations bring the emotions flooding back. The notes from the following month show a similar pattern of anxiety, recurring dreams, and stress. He reported two incidents where he “flipped out” at work. His home life continued to be stressed as his physical and mental problems continued to overwhelm him. He showed signs of depression and anxiety and reported feeling like he was “not with it.” (TR. 409-412).
In September 2010, the plaintiff had a rough time dealing with the ninth anniversary of the 9/11 attacks. He stated that he was feeling slightly more energized, but was still stressed and anxious about his inability to work. He claimed that he took some photographs in order to relax, but felt he was forcing himself to do it rather than doing it for pleasure. At the end of the month, he felt like he was in a fog, was easily confused, and was thinking slowly. Although Dr. Snyder noted the plaintiff was more “optimistic,” he also found the plaintiff exhibited signs of anger, guilt, anxiety, and hypervigilance. October 2010 saw the plaintiff struggle with blaming himself and guilt over the 9/11 attacks. He had difficulties accepting his mental and physical state, asking questions like “What happened to me?”. By the end of the month, Dr. Snyder stated that the plaintiff had more energy and his mood had improved. (TR. 408-9).
The November and December 2010 notes3 indicate the plaintiff continued to suffer from depression and anxiety. Dr. Snyder further found that the plaintiff had ongoing stress stemming from his worsening physical and mental condition. These conditions were also affecting his family relationships. By the end of December, however, the plaintiff was more alert and better rested as a result of his medication and drinking coffee in the morning. However, the first weeks of January 2011 saw his condition worsen. He displayed significant anger and frustration stemming from his responsibilities during 9/11 and with the United States Air Force. Specifically, during the January 23, 2011 session the plaintiff cried and yelled, becoming so agitated that Dr. Snyder had to calm him down. Despite his “improving mood,” the doctor noted he “remains very fragile, physically and mentally.” (TR. 406-7).
The plaintiff continued to struggle into February and March 2011. His emotional distress affected his relationship with his family, specifically his two sons who he found to be irresponsible and difficult to discipline. He was also tense, anxious, and fearful during most of his February sessions. He experienced disorganized thought patterns at the end of that month. In March, he expressed great concern about a return trip to Brooklyn and Dr. Snyder helped him plan a route that would avoid the 9/11 site. In the middle of March, he was denied disability benefits from another entity, leading to feelings of helplessness and general distress. At the end of March, he was depressed and “tortured” by physical pain. He blamed the government for his situation and was seeking legal advice on how to proceed. (TR. 403-4).
None of these previously outlined sessions were discussed by the ALJ. During his first session in April 2011, the plaintiff felt better and stated that drinking coffee helped alleviate his pain. However, the *411follow-up sessions that same month showed a resurgence of his anger and frustration, along with a need to vent. He further noted feeling pressures and being betrayed by his employer. In May 2011, he reported that he was upset and stayed up all night obsessing over some information from 'the government. This suspicion spilled over to his next few sessions as he continued to feel betrayed by the government and suspicious of its actions. Dr. Snyder noted the plaintiff had rapid and pressured speech when talking about 9/11, world events, and politics. (Tr. 401-4).
During the June 2, 2011 session, the plaintiff reported fighting with his wife about finances and health problems. He also showed signs of memory and focus issues as he had to used a GPS device to find Dr. Snyder’s office, despite being treated at the same location for nearly a year. In mid-June, he reported helping his son with school and boy-scout projects, but also noted continued preoccupation with his employment situation. Although on June 16 he showed “better spirits,” the next session saw him struggle with depression, poor sleep, and hypervigilance. He also was fighting a plethora of bad memories. During his last session that month, he had difficulty thinking and processing his thoughts, despite having coffee beforehand. He also continued to show poor sleep patterns, depression, and anxiety into July 2011. His sessions in July saw him regress, as he appeared more depressed and overwhelmed. Dr. Snyder recommended he go to a local emergency room if he felt it was necessary. The plaintiffs depression continued through the end of that month, as he vented often and was frustrated at his loss of physical functioning. (Tr. 399-401).
The plaintiffs struggles with his family and mental status continued into early August 2011. He fought with his wife frequently about finances and also was forced to register his son for school. Dr. Snyder observed him to be upset, anxious, depressed, and tearful during his first two sessions that month, but noted he was in better spirits on August 19, 2011. In his next two sessions, spanning into September 2011, the plaintiff continued to show frustration with his family and financial situation. During his appointment four days before the tenth anniversary of the 9/11 attacks, he was depressed, anxious, and tearful. Dr. Snyder characterized him as “fragile.” During his last two September 2011 appointments, he exhibited increased energy and mood, but still appeared stressed and anxious. (TR. 397-99).
The plaintiffs condition continued to worsen through October 2011 as he experienced greater physical pain from his other health issues. Dr. Snyder noted at the end of the month that the plaintiff was overwhelmed during an evaluation and didn’t know how to answer the questions posed to him. His home situation continued to deteriorate through November 2011. His sons were uncooperative and he felt his mother was interfering with his family life. In the middle of that month, he was denied disability and that increased his anger and depression. At the end of November, he and his wife were talking over each other and he characterized his home life as “total dysfunction.” (TR. 396-97).
Starting in December 2011, the plaintiff became more positive, despite little change in his family situation. Dr. Snyder noted that during December, the plaintiff had made very little progress and believed him to have a poor prognosis. This continued well into January 2012 as the plaintiff presented as “very depressed,” despite participating well during these therapy sessions. Dr. Snyder, however, did see some prog*412ress starting in February 2012 and running into March of that same year, as he upgraded the plaintiffs progress and prognosis to “fair.” (TR. 393-5).
On June 2, 2011, Dr. Snyder completed a mental findings summary. He opined that the plaintiff would be unable to complete full-time work and suffered from numerous psychological limitations. In terms of his supporting clinical findings, the doctor detailed the following observations to support his diagnoses: poor memory, perceptual disturbances, sleep disturbances, personality change, mood disturbances, social withdrawal or isolation, emotional liability, decreased energy, recurrent severe panic attacks, loss of interest, recurrent recollections of traumatic events, pressured speech, hostility, vigilance, mood disturbances, paranoia, guilt, and anxiety. (TR. 278). Turning to restrictions, Dr. Snyder found the following marked limitations: understanding and remembering simple and detailed instructions; carrying out detailed instructions; maintaining concentration for 2 hours; performing activities within a schedule; maintaining regular attendance; punctuality; sustaining an ordinary routine without supervision; working in proximity to others without being distracted by them; making simple work related decisions; and completing a normal workweek without psychological interruptions. (TR. 280).
He further found that the plaintiff suffered marked restrictions in terms of responding appropriately to changes in work setting, traveling to unfamiliar places, and setting realistic goals independently. (TR. 281). He noted episodes of decompensation, marked restrictions in daily living, and difficulties with concentration, persistence, and pace. (Id.). He found the plaintiff only had moderate limitations in terms of social functioning. Lastly, he concluded the plaintiff was incapable of even “low stress” work and would have to miss work more than three times a month because of his anxiety, panic attacks, poor memory, and poor concentration. (TR. 282). Plaintiff received a Global Assessment of Functioning4 (“GAF”) score of 35. (TR. 277).'
The plaintiff was also treated by Dr. Michael W. Spence, D.O., who was his treating physician between 2010 and the date of the ALJ’s decision. During his September 23, 2011 check-up, the plaintiff was depressed. He was also easily distracted and his thought process demonstrated tangential thinking. These findings were consistent throughout his treatment with Dr. Spence, including follow-ups on October 24, 2011 where the plaintiff was again depressed and tearful. Dr. Spence also noted the plaintiff was alert and oriented with intact memory during these encounters. (TR. 350-53). Further notes from February and March 2012 indicate the plaintiff was alert and oriented, had appropriate mood, and was attentive. (TR. 360-66).
VI. DISCUSSION
The plaintiff raises a host of arguments in his appeal to the court.5 Although not *413raised first, he essentially argues that the ALJ erred in step 3 of the disability determination by finding that plaintiff does not have an impairment or combination of impairments that meets or medically equals the listing in 12.04B in 20 C.F.R. Part 404, Subpart P, Appendix 1. Plaintiff contends that the objective medical evidence of record, specifically the detailed and well-documented treatment notes and diagnoses of Dr. Snyder, establishes that plaintiff meets the requirements of listings in 12.04B. The parties do not appear to dispute that Dr. Snyder is a treating physician, so the central question is whether the ALJ assigned his opinions little weight based on other medical evidence. It is a threshold issue and the court will address it first.
A claimant bears the burden of establishing that his or her impairment meets or equals a listed impairment. Young v. Comm. of Social Sec., 322 Fed.Appx. 189, 190 (3d Cir.2009) (citing Poulos v. Comm. of Social Sec., 474 F.3d 88, 91 (3d Cir.2007)). To match a listed impairment under the regulations, a claimant’s impairment must satisfy all of the criteria for the listing. 20 C.F.R. § 404.1525(c)(3). If the claimant’s impairment matches or equals a listed impairment, then she is disabled, and no further analysis is necessary. Cunningham v. Comm. of Social Sec., 507 Fed.Appx. 111, 115 (3d Cir.2012) (iciting Brewster v. Heckler, 786 F.2d 581, 584-84 (3d Cir.1986)). The court considers symptoms, the extent to which those symptoms can reasonably be accepted as consistent with the objective medical evidence and other evidence of the record. 20 C.F.R. § 404.1529. The ALJ need not use particular language or a particular format at step 3, as long as the decision permits meaningful judicial review. Ortega v. Comm. of Social Sec., 232 Fed.Appx. 194, 197 (3d Cir.2007) (citations omitted).
An ALJ “may properly accept some parts of the medical evidence and reject other parts, but she must consider all the evidence and give some reason for discounting the evidence she rejects.” Adorno v. Shalala, 40 F.3d 43, 48 (3d Cir.1994) (citing Stewart v. Secretary of H.E.W., 714 F.2d 287, 290 (3d Cir.1983)). When dealing with a treating physician, the ALJ must consider the evidence that supports that doctor’s opinion and may reject it only on the basis of “contradictory medical evidence.” Morales v. Apfel, 225 F.3d 310, 317 (3d Cir.2000). The ALJ cannot rely on “his or her own credibility judgments, speculation or lay opinion.” Id. Moreover, it is inappropriate for an ALJ to merely root out and find the evidence that supports a finding of not disabled, while simultaneously ignoring or glossing over evidence that support’s a finding of disabled. See Colon v. Barnhart, 424 F.Supp.2d 805, 813 (E.D.Pa.2006) (finding that'an ALJ is required to discuss his or her “discounting of probative record evidence”).
In terms of evaluating the medical evidence, generally an ALJ will give more weight to a treating physician’s opinion. 20 C.F.R. § 404.1527(d)(2) provides in relevant part:
Generally, we give more weight to opinions from your treating sources, since these sources are likely to be the medical professionals most able to provide a detailed, longitudinal picture of your medical impairment(s) and may bring a unique perspective to the medical evidence that cannot be obtained from the objective medical findings alone or from *414reports of individual examinations, such as consultative examinations or brief hospitalizations.
“An ALJ may reject a treating physician’s opinion outright only on the basis of contradictory medical evidence, but may afford a treating physician’s opinion more or less weight depending upon the extent to which supporting explanations are provided.” Plummer v. Apfel, 186 F.3d 422, 429 (3d Cir.1999). Where a treating physician has an opportunity to offer opinions based on continuous observations of the plaintiffs condition over an extended period of time, it should be properly considered unless there is contrary medical evidence contained in the record. Rocco v. Heckler, 826 F.2d 1348, 1350 (3d Cir.1987) (citing Podedworny v. Harris, 745 F.2d 210, 217 (3d Cir.1984)) (emphasis added).
The ALJ concluded that plaintiff suffers from several mental disorders, including Post Traumatic Stress Disorder (PTSD) and depressive disorder not otherwise specified. (Tr. 29). The ALJ considered these disorders under 20 C.F.R. Part 404, Subpart P, App. 1 listings 12.04 and 12.06. (Id.). The ALJ noted that she considered whether the “paragraph B” and “paragraph C” criteria for these disorders were met by plaintiff, apparently conceding that the “paragraph A” criteria were met. Plaintiff argues that he meets the “paragraph B” criteria.
“Paragraph B” criteria require that the disorder in question results in at least two of the following: marked restriction of activities of daily living; marked difficulties in maintaining social functioning; marked difficulties in maintaining concentration, persistence, or pace; or repeated episodes of decompensation, each of extended duration. (Tr. 30-31). Plaintiff argues that he meets the “B” criteria because Dr. Snyder found marked difficulty in maintaining activities of daily living and maintaining concentration, persistence, and pace.
Marked limitations in the activities of daily living are not defined “by a specific number of different activities of daily living in which functioning is impaired, but by the nature and overall degree of interference with function.” The regulations continue to note that “we may still find that you have a marked limitation in your daily activities if you have serious difficulty performing them ... in a suitable manner, or on a consistent, useful, routine basis, or without undue interruptions or distractions.” 20 C.F.R. Part 404, Subpart P, App. 1 section 12.00.
The ALJ found that the plaintiff suffered from mild restrictions in activities of daily living and had moderate difficulties in the area of concentration, persistence, or pace. These conclusions and findings were based solely on the plaintiffs testimony. (TR. 30-31). Although addressed later in her findings, the ALJ gave little weight to Dr. Snyder’s assessments in these same areas because they were inconsistent “with the claimants own contemporaneous self-reported level of functioning at home which includes caring for children, doing the shopping, laundry, and housework.” (TR. 38). The ALJ went on to discuss how the plaintiff showed “noted improvement ... with ongoing treatment.” The ALJ then detailed eleven sessions that showed some positive mental developments. (TR. 35-36). The ALJ also briefly noted some other positive mental findings related to memory, speech, orientation, mood, affect, and attention. (TR. 36). However, these were findings in a few primary care notes, along with a single neurological follow-up.
It is unclear from the ALJ’s opinion exactly how much weight she assigned Dr. Snyder’s opinion. In one respect, she adopted Dr. Snyder’s findings that the *415plaintiff suffered only moderate restrictions in terms of social functioning without any further discussion. (TR. 31). However, the ALJ then gave “little weight” to Dr. Snyder’s contemporaneous opinions in the areas of daily living and concentration, persistence, and pace. (TR. 37).
In finding the plaintiff has mild restrictions in the his daily activities, the ALJ stated the plaintiff cares for his teenage children, drives every two weeks, does some shopping, and helps with the household chores. (TR. 30). Although the plaintiff reported driving to doctor’s appointments every two weeks, he testified that he stopped helping with the chores around the same time he stopped working in June 2010. (TR. 61). Moreover, there is nothing to indicate how caring for two teenage children, who both attended high school and are active boy scouts, (TR. 62), would require significant contributions from the plaintiff. Further, in reviewing the hearing testimony, the court does not find any evidence that would indicate the plaintiff did any shopping or helped with the housework as of June 2010. Although he did discuss helping his sons with a boy scout project and a school assignment, these were not part of the record cited by the ALJ when she was determining whether the plaintiff satisfied the “paragraph B” criteria. (TR. 401, 413). These instances were also taken into account by Dr. Snyder as he made notes of them prior to making his disability determination.
Whereas the ALJ pointed to four minor activities of daily living to show mild restrictions, Dr. Snyder provided thirty pages of fairly detailed notes to support his diagnosis and evaluation. (TR. 393-413). Even though there is some improvement in his condition, the ALJ’s selective discussion of these progress notes is insufficient to support her conclusion. She specifically cited good sessions in April and June 2011, without discussing the findings that demonstrate weeks later the plaintiff battled with depression, poor sleep, hyper-vigilance, recurring tragic memories, poor thought processing, anxiety, feelings of being overwhelmed, venting, and frustration. (Tr. 399-401). The ALJ also pointed to sessions in September 2011 that showed some improvement, despite many of the findings that indicated ongoing family problems, depression, anxiety, and hostility toward his wife. (TR. 397-99). In sum, the court agrees with plaintiff that the ALJ “cherry picked” medical evidence to support a finding of not disabled, rather than reviewing and evaluating the objective medical evidence supporting Dr. Snyder’s opinion. There is not substantial medical evidence of record to support the ALJ’s finding that the plaintiff was' only mildly restricted in his activities of daily living., Dr. -Snyder’s findings indicated marked limitations and should have been accorded great weight as an opinion of a treating physician. As such, the court finds the plaintiff was markedly limited in his activities of daily living.
Turning toward concentration, persistence, and pace, the ALJ cited the same evidence, along with the plaintiffs demeanor during the hearing, to find he had only moderate restrictions in this area. “Concentration, persistence, or pace refers to the ability to sustain focused attention and concentration sufficiently long to permit the timely and appropriate completion of tasks commonly found in work settings.” Moreover, the regulations call for the ALJ to evaluate the “nature and overall degree of interference with function,” not merely the number of tasks the plaintiff can perform. 20 C.F.R. Part 404, Subpart P, App. 1 section 12.00.
As discussed above, the hearing testimony cited by the ALJ is devoid of any indication that as of June 2010 the plaintiff *416assisted with the household chores or shopping. Moreover, assisting his sons with two different projects does not indicate how his mental state would interfere with his overall ability to function in a sustained work environment. The ALJ failed to evaluate the objective medical evidence and findings when rendering this determination. The evidence and conclusions of the ALJ were not based on “contradictory medical evidence.” Plummer, 186 F.3d at 429. Rather, it was based on the ALJ’s unsupported lay opinion about the plaintiffs ability based on sparse information taken, according to her decision, exclusively from the hearing testimony. (TR. 31). See Morales, 225 F.3d at 317 (holding an ALJ may not base his or her findings on lay opinion, speculation, or credibility determinations).
In contrast, Dr. Snyder found the plaintiff would have marked limitations with understanding and remembering simple and detailed instructions, carrying out detailed instructions, maintaining attention and concentration for two hours, keeping a schedule, sustaining an ordinary work routine, working in coordination with others, making simple work-related decisions, and completing a normal workweek without interruptions stemming from his psychological problems. (TR. 279-280). Although the report was created on June 2, 2011, (TR. 277), Dr. Snyder had been treating the plaintiff for nearly a year at that point and conducted forty-three sessions over that time span. (TR. 401-13). The ALJ did not address any of these sessions and-opted to focus on a few-notes that showed improvement, without addressing the contemporaneous notes that showed the plaintiff continuing to struggle with his psychological impairments. (TR. 35-38). The court addressed the inadequacy of this type of “cherry picking” above. Further, the plaintiffs testimony confirmed this diagnosis. The plaintiff said that he has struggled to maintain a consistent work schedule between September 2001 and June 2010, required a cot in his office, took excessive sick and vacation time, and became unable to work as of June 2010. (TR. 53, 72-73).
The ALJ also assigned the plaintiffs GAF score of 35 “little weight.” (TR. 37). GAF scores do not have a “direct correlation to the severity requirements” under SSA rules. West v. Astrue, 2010 WL 1659712, at *4 (Apr. 26, 2010 E.D.Pa.) (quoting Watson v. Astrue, 2009 WL 678717, at *5 (Mar. 13, 2009 E.D.Pa.)) (quoting 66 Fed.Reg. 50746, 50765-65 (2000)). However, “a GAF score constitutes medical evidence accepted and relied upon by a medical source and must be addressed by an ALJ in making a determination regarding a claimant’s disability.” Colon v. Barnhart, 424 F.Supp.2d 805, 812 (E.D.Pa.2006); Joseph v. Astrue, 2012 WL 4459796, at *8 (Apr. 26, 2012 E.D.Pa.) (GAF scores can impact whether a plaintiff meets listed impairments). GAF scores of 50 and below indicate serious or major impairments with functioning, including inability to maintain social functioning and inability to maintain employment. See Am. Psych. Assoc., Diagnostic & Statistical Manual of Mental Disorders 34 (2000). The ALJ mentioned the GAF score briefly, but gave it little weight given it “fails to take, into account the [plaintiffs] improvement with treatment” and should be- evaluated in light of the record as a whole. The evidence of record discussed above demonstrates that plaintiff has a marked limitation in maintaining consistency, persistence, and pace. The GAF is consistent with these findings. The ALJ improperly weighed and essentially ignored this relevant medical evidence.
The ALJ’s step 3 decision discussed the different regulations she applied, the “B” *417and “C” criteria she considered, and some of evidence from the record. However, much of the evidence of record which demonstrates the severity of plaintiffs impairments seems to have been disregarded at this step, and the ALJ did not explain how or whether she discounted that evidence at step 3. Accordingly, the court is not satisfied that substantial evidence supports the ALJ’s determination that plaintiffs impairments do not meet the requirements of 20 C.F.R. Part 404, Subpart P, App. 1 listings 12.04B and 12.06B. The court finds that plaintiff has marked limitations in activities of daily living and concentration, persistence, and pace. Therefore, his impair-nients meet the severity requirements of the regulations.
Finding that plaintiffs impairments meet the listings at step 3 “results in a finding of disability.” Cruz v. Commissioner of Social Sec., 244 Fed.Appx. 475, 480 (3d Cir.2007) (citations omitted). Thus, the analysis ends at step 3, and the court need not consider plaintiffs other arguments for relief. Plaintiffs request for DIB is granted.
VII. CONCLUSION
Based on the foregoing, the plaintiffs appeal of the decision of the Commissioner of Social Security, (Doc. No. 1), is GRANTED, the decision of the Commissioner is REVERSED, and the Commissioner is directed to award plaintiff disability insurance benefits. A separate order shall issue.
ORDER
For the reasons stated in the court’s memorandum issued this same day, IT IS HEREBY ORDERED THAT:
(1)The plaintiffs appeal of the decision of the Commissioner of Social Security, (Doc. No. 1), is GRANTED;
(2) The decision of the Commissioner is REVERSED;
(3) The Commissioner is directed to award plaintiff disability insurance benefits from June 4, 2010;
(4) The Clerk is ORDERED to close this case.
. The court summarizes the sessions not discussed by the ALJ to give a full background *410into Dr. Snyder's treatment.
. Dr. Snyder’s notes are not entirely clear as they were hand-written and copied into the record. The court has thoroughly reviewed them in order to ensure accuracy with the doctor’s findings.
. A GAF score, or a Global Assessment Functioning scale, takes into consideration psychological, social, and occupational functioning on a hypothetical continuum of mental health-illness and is not supposed to include the consideration of impairment in functioning due to physical (or environmental) limitations. The scale ranges from the highest score of 100 to the lowest score of 1. A GAF of 31-40 indicates some impairment in reality testing or communication, or major impairment in several areas, such as work or school family relations, judgment, thinking, or mood.
. The plaintiff makes additional arguments challenging the ALJ’s evaluation of his physical ailments, the weighing medical evidence, *413and the hypothetical question posed to the vocational expert. (Doc. 1). Although those arguments appear to have merit, the court need not reach or address them given the discussion below. | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224471/ | MEMORANDUM
L. FELIPE RESTREPO, District Judge.
Plaintiffs Zachary Barker, Francis X. Boyd Jr., and David W. Smith brought suit against their former employer, the Boeing Company (“Boeing”), alleging that Boeing terminated their employment on the basis of their races (Caucasian and Native American) in violation of 42 U.S.C. § 1981. Boeing counters that it terminated their employment because, while at work, they posed for a photograph as members of the Ku Klux Klan. Boeing now moves for summary judgment in its favor. For the reasons that follow, I will grant the motion.
I. Backgkound 1
On May 3, 2012, Kenta Smith, an African-American aircraft painter employed by Boeing in its Ridley Park, Pennsylvania facility, reported to his supervisor, Joseph Williams, that he had recently encountered three of his co-workers dressed as the Ku Klux Klan. JA 90-91, 119, 513. He showed Williams a photograph that he had taken with his cell phone. See id.; JA 357, 395. It depicts three men, standing in a row and facing the camera, wearing loose, white, robe-like suits and pointed white hoods. The hoods cover their faces except for a horizontal oval that exposes their eyes. Two of the men are holding makeshift wooden crosses approximately a foot high. The men to the center and right are leaning together so that their hoods nearly touch, a cross extended before them. Ex. A; JA 357, 395. The picture is very clearly an image of three Klansmen.
It is undisputed that the photograph depicts Barker, Boyd and Smith. See JA 91-95, 112-16, 431. All three plaintiffs are fair-skinned; Boyd and Smith identify as Caucasian, Barker as Native American. See JA 91-92, 97; Compl. (Doc. 1) ¶ 4. It is also undisputed that the photo was taken in the Boeing paint shop while the plaintiffs were on the job; that they were wearing company-issued paint suits and “head socks” modified to create a point; and that the crosses were constructed of paint-mix*420ing sticks and duct tape. Id. Finally, there is absolutely no dispute — nor could there be — that they intended to look like the KKK. E.g. JA 433, 455, 473-75.
According to Williams, Kenta Smith said that he was “unnerved” by the incident but did not want to file a formal complaint. JA 406, 119. Nonetheless, Williams reported it to his supervisor, who relayed the information to Boeing’s human resources department. JA 88, 406-07. Thomas Ce-redes, an Equal Employment Opportunity (“EEO”) Investigation Officer, launched an investigation, in the course of which he interviewed Williams, Kenta Smith, and the three plaintiffs. See JA 80-125, 481-82.
Kenta Smith told Ceredes that his colleagues had confronted him dressed as members of the KKK and that he had snapped the picture before they could react. JA 89, 110-11. He also reported that there had been a noose hanging in the paint shop for some time. JA 90, 110. Investigators located the noose dangling from a rafter, as well as a stuffed toy monkey lodged between a beam and a pipe in a different area of the workshop facility. JA 91, 119, 396-97.
The three plaintiffs told Ceredes that Kenta Smith had engineered the KKK photograph as a joke. JA 91-94, 112-16. According to their statements, and their depositions in this case, Kenta Smith was responsible for an atmosphere of race-based “banter” that pervaded the paint shop: He joked in racial terms, referred to his colleagues by racial slurs, and alluded to having “the race card” in his wallet. Id.; see also JA 430-35, 455-57, 470-75. On the day the photograph was taken, they contend, Kenta Smith joked that his colleagues looked like the KKK in their paint suits, exhorted them to pose for a picture, and then shaped their hoods into points and provided the crosses in order to make the picture “funnier.” Id. They suspected that he had disclosed the photograph after a falling-out with David Smith, as retaliation. JA 112, 115, 471. Another paint-shop employee, Donald Kirby, also contacted Ceredes to volunteer a statement affirming that “[Kenta] Smith refers to white employees as ‘honkys’ and ‘crackers’” and that Baker, Boyd and Smith were “good workers and got caught up in this mess when it was just a joke.” JA at 155.
This was the extent of Ceredes’ investigation. He did not interview any other paint-shop employees about the alleged atmosphere of “racial banter.” JA 484-85. There is purportedly another painter, Paul Paraka, visible in the background of the picture, but Ceredes did not interview him either. JA 432-33. Nor did he interview other employees to whom Kenta Smith had shown the picture. JA 111, 488-90.
Ceredes compiled the results of his investigation in an “EEO Investigation Report.” JA 88-99. Weighing the conflicting statements, Ceredes found that Kenta Smith was more credible than Barker, Boyd and Smith, in part because the latter three had not offered many of the details of their story until a second round of interviews, and then had used suspiciously similar phrasing. JA 95-96. The report did not mention Kirby. It concluded that Barker, Boyd and Smith had violated Boeing’s “Workplace and Sexual Harassment” policy by “dressing themselves up, and presenting themselves to Smith, as, Ku Klux Klan’s men [sic] in the workplace, which is unacceptable and racial in nature.” JA at 96. Ceredes sent the report to his manager, Jana Flessner, and her manager, Alan Seherkenbaeh; they in turn provided it to Boeing’s Director of EEO Compliance, Ozzie Pierce. JA 482, 495-96, 505-06.
*421Boeing fired the three plaintiffs very soon thereafter. It is unclear who made the initial recommendation, see JA 486, 497, 506, but Scherkenbach and Pierce approved the termination. JA 498, 506-511. Each plaintiff received a notice of discharge, dated May 17, 2012 and effective immediately, that included the following language:
It has been determined you engaged in inappropriate race-based behavior which is unacceptable for the workplace. The company deems your behavior in this matter to be in violation of the company’s expectations as set form in PRO-4332, “Workplace and Sexual Harassment.”
JA 100, 103, 106. Kenta Smith was not investigated or disciplined in relation to the incident.
The plaintiffs grieved their termination, initially with the representation of their union, the UAW Local 1069. In the course of the proceeding the plaintiffs provided statements from five other employees, who affirmed that the plaintiffs were not racist and that the “rope” hanging in the paint shop had been there for many years. See JA 148-52. Two of the statements, signed by employees James A. Light and Andrew C. Meier, asserted that Kenta Smith, on the day the photograph was taken, had asked if they wanted to be “in the family picture,” and that “[e]veryone was just joking and laughing.” JA at 150-51.
A Discharge Board of Review meeting regarding Barker’s termination was held on June 21, 2012. The Union and Barker argued that the photograph was a joke and that Kenta Smith’s behavior “should mitigate the discipline” for Barker. JA at 167. According to a June 25, 2012 letter from Boeing to the UAW, the Board of Review found the argument unpersuasive:
During the hearing the Company explained that given the nature and history of the Klan (hate-filled rhetoric and violence) and its meaning to African-American’s [sic] in particular, this behavior, whether in a joking manner or not, is a clear and significant violation of Company policy and cannot be tolerated .... There was nothing presented at the hearing to convince the Company the grievant was not a willing and active participant in dressing as a Klansman and allowing himself to be photographed. Based on the evidence, the only appropriate outcome is to uphold the discharge of Mr. Barker and deny the grievance.
JA at 167. It is unclear from the record whether similar hearings were held for Smith and Boyd. In July of 2012, the Union withdrew all three men’s grievances. See JA 166, 440, 458.
Barker, Boyd and Smith have now brought suit against Boeing, alleging that it discriminated against them on the basis of race in violation of 42 U.S.C. § 1981.2 Boeing moves for summary judgment in its favor.
II. Jurisdiction and Standard of Review
This Court has jurisdiction pursuant to 28 U.S.C. § 1331. In ruling on a motion for summary judgment, a court must “construe the evidence in the light most favorable” to the nonmoving party, Zimmerman v. Norfolk S. Corp., 706 F.3d 170, 176 (3d Cir.2013), and grant summary judg*422ment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A ‘genuine dispute’ exists if a reasonable jury could find for the nonmoving party.” Zimmerman, 706 F.3d at 176. Once the moving party has carried its burden, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). It must, instead, identify evidence sufficient to support a verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); C. Wright, A. Miller, & M. Kane, 10B Fed. Prac. & Proc. Civ. § 2734 (3d ed.). “Rule 56(c) mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s ease, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
III. Discussion
A. The McDonnell Douglas Framework
Section 1981 provides that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts .... ” 42 U.S.C. § 1981(a). It has been held to prohibit “discrimination in private employment on the basis of race,” including racial discrimination against white persons. McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273, 285, 96 S.Ct. 2574, 49 L.Ed.2d 493 (1976). “[T]he substantive elements of a claim under section 1981 are generally identical to the elements of an employment discrimination claim under Title VII.” Brown v. J. Kaz, Inc., 581 F.3d 175, 181-82 (3d Cir.2009). “In the absence of direct evidence of discrimination,” the familiar burden-shifting framework set forth in McDonnell Douglas Corporation v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), applies. Anderson v. Wachovia Mort. Corp., 621 F.3d 261, 270 (3d Cir.2010).
To prevail on a claim of race discrimination pursuant to Title VII or § 1981, a plaintiff must first establish a prima facie case by showing that “s/he suffered an adverse employment action ... under circumstances that could give rise to an inference of intentional discrimination” on the basis of race. Makky v. Chertoff, 541 F.3d 205, 214 (3d Cir.2008); see also Iadimarco v. Runyon, 190 F.3d 151, 163 (3d Cir.1999) (requiring plaintiffs who allege reverse race discrimination to present “sufficient evidence to allow a reasonable fact finder to conclude ... that the defendant treated [him] less favorably than others because of his race”).3 The most common evidence of circumstances suggesting discrimination is evidence of *423disparate treatment, “whereby a plaintiff shows that [s/he] was treated less favorably than similarly situated employees” of a different race. Doe v. C.A.R.S. Prot. Plus, Inc., 527 F.3d 358, 366 (3d Cir.2008).
If the plaintiff makes out the pri-ma facie case, the burden shifts to the defendant “to articulate some legitimate, nondiscriminatory reason” for the adverse employment action. McDonnell Douglas Corp., 411 U.S. at 802, 93 S.Ct. 1817. Once the employer does this, the burden “rebounds to the plaintiff, who must now show by a preponderance of the evidence that the employer’s explanation is pretextual.” Anderson, 621 F.3d at 271 (quoting Fuentes v. Perskie, 32 F.3d 759, 763 (3d Cir.1994)). “[A] plaintiff may defeat a motion for summary judgment by either discrediting the defendant’s proffered reasons or adducing evidence that discrimination was ‘more likely than not a determinative cause of the adverse action.’ ” Id. & n. 7 (quoting Fuentes, 32 F.3d at 764) (alterations omitted). “[Tjhroughout this burden-shifting paradigm the ultimate burden of proving intentional discrimination always rests with the plaintiff.” Fuentes, 32 F.3d at 763. The factual question “is whether discriminatory animus motivated the employer, not whether the employer is wise, shrewd, prudent, or competent.” Id. at 765.
B. Analysis
It bears emphasizing, at the start, what the plaintiffs do not contest. They do not contest the fact that they posed for a photograph, while on the job, as members of the KKK. They acknowledge that a reasonable person could find the image extraordinarily offensive. They concede, in fact, that their willing participation in the picture constituted a violation of Boeing’s workplace harassment policy, and that termination was an appropriate sanction. See, e.g., JA 432, 442, 451, 460, 468, 475-77. The gist of their complaint is that Kenta Smith was at least as much to blame as they were, and should have suffered equal consequences. Id. But because they are fair-skinned and he is black, they allege, Boeing believed him and not them. E.g. JA 477. Thus they were fired, and he was not. The problem with this position is that, even if accurate, it does not make out a § 1981 claim of intentional race discrimination.
First, with respect to the prima facie case: The plaintiffs argue that they were “similarly situated” to Kenta Smith, such that their disparate treatment gives rise to an inference of discrimination. He was the instigator; they were hapless participants; he equally culpable. Accepting the plaintiffs’ construction of the facts for purposes of this motion, the argument ignores several salient differences. Kenta Smith reported an incident of racial harassment. The plaintiffs did not—they were, instead, the object of the report. The plaintiffs appeared in a photograph dressed as the KKK. Kenta Smith did not.
These differences are meaningful. Whatever Kenta Smith did, he did not appear in that picture, and because the ultimate question here is a question of Boeing’s intent, appearances matter. What Boeing confronted, most centrally, was a report of racial harassment and a photograph of the plaintiffs clad in racial hate-group attire. It strains credibility, given those circumstances, for the plaintiffs to argue that they were “similarly situated” to the person who made the report.4 There are no other facts suggesting *424a “nexus” between the plaintiffs’ termination and animus toward their races. Doe, 527 F.3d at 366.
Even if a jury could somehow find that the evidence met the prima facie threshold, the plaintiffs’ case would falter at the requirement of showing pretext. It is beyond any doubt that dressing up as the KKK at work constitutes a legitimate, nondiscriminatory basis for termination. See generally Virginia v. Black, 538 U.S. 343, 352-57, 123 S.Ct. 1536, 155 L.Ed.2d 535 (2003) (chronicling the history of the KKK’s terroristic activity in America). It therefore falls to the plaintiffs to demonstrate that this explanation for their firing was pretext, through evidence that “a discriminatory reason more likely motivated [Boeing] or ... that [Boeing’s] proffered explanation is unworthy of credence.” Texas Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 256, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981).
This they cannot do. There is no evidence that could lead a reasonable jury to conclude that Boeing did not really fire the plaintiffs for posing as the KKK, or that a more likely cause was Boeing’s animus toward white people. The plaintiffs argue, variously, that Kenta Smith was not credible and that Ceredes’ investigation was incomplete, but those arguments are beside the point. The question is whether Boeing’s rationale for firing the plaintiffs — that it believed they had violated its harassment policy — is a lie, and nothing in the record suggests that it might be.
This is not a case, like Kowalski v. L & F Products, 82 F.3d 1283, 1290 (3d Cir.1996), where the evidence suggests that the employer’s internal investigation might be a cover-up for its actual motivation in terminating an employee.5 The Third Circuit deemed the evidence sufficient to support a finding of pretext in that case because, among other things, the employer had never provided the report on which it claimed to have relied.6 The plaintiffs in this case do not contend that Boeing’s investigation was launched in bad faith. They fault Ceredes for failing to interview available witnesses and omitting Kirby’s statement from his report, but those shortfalls hardly suggest, as in Kowalski, that the investigation was a pretense and its conclusions engineered. On the contrary: The plaintiffs concede the necessity of the investigation and its primary conclusion, which is that they willingly participated in the KKK picture.
*425Barker also argues that Boeing failed to discipline Sid Powell, an African-American employee, after a physical altercation with Barker that allegedly involved racial hostility. See Barker’s Resp. (Doc. 34), 10-11. According to Barker, this shows that Boeing did not “consistently enforce its [workplace harassment] policies,” and therefore that Boeing’s “stated reason for terminating Barker was pretextual.” Doc. 34 at 11. Neither conclusion follows. By Barker’s own testimony, the incident with Powell was a physical altercation involving a single race-inflected insult, and. Barker himself did not report it. JA 435-36, 411-412. There is no evidence that the other Boeing witnesses knew that the altercation had any racial content. Boeing’s failure to discipline Powell for a very different and unrelated incident does not show inconsistency in enforcement of its' harassment policies, let alone such inconsistency as to suggest that Boeing’s rationale for the plaintiffs’ termination might be pretextual.
In truth, the plaintiffs themselves do not contest the fact that they were fired because of the KKK photograph incident. Their complaint actually seems to be that the severity of the sanction, and the disparate treatment of Kenta Smith, resulted from the races of the employees involved. If this is the plaintiffs’ claim, it is really a “mixed-motive” claim. See Makky, 541 F.3d at 213 (explaining, in Title VII context, that a plaintiff may prevail under “mixed-motive” theory by showing “that an employment decision was made based on both legitimate and illegitimate reasons”); see also Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989). But a mixed-motive theory is not available to the plaintiffs because (1) as they have not presented it, it is waived; and (2) the plaintiffs could not show “by direct evidence that an illegitimate criterion was a substantial factor in the [employment] decision,” as a mixed-motive § 1981 claim requires. Brown v. J. Kaz, Inc., 581 F.3d 175, 182 (3d Cir.2009) (quoting Price Waterhouse, 490 U.S. at 276, 109 S.Ct. 1775 (O’Connor, J., concurring)); see also Anderson, 621 F.3d at 269 (noting that direct-evidence requirement creates a “high hurdle” for plaintiffs).7
Finally, it is worth acknowledging the possibility that Boeing did consider the races of Kenta Smith, Barker, Boyd and David Smith in attempting to determine the nature of the KKK photograph incident and the appropriate response. It could hardly do otherwise. And it is certainly possible that the racial alignment of the employees contributed to Ceredes’ conclusion that Barker, Boyd and Smith had violated Boeing’s harassment policy, or to Boeing’s endorsement of a swift and serious sanction. The Ku Klux Klan is a white supremacist organization that has pursued its agenda through violence and terror largely directed at African-Americans. See Black, 538 U.S. at 352-57, 123 S.Ct. 1536. In light of that history, it is a simple reality that fair-skinned men presenting themselves as members of the KKK to a dark-skinned person has a very particular resonance. That this may have factored into Boeing’s interpretation of the event does not change the discrimination analysis, under either a pretext or mixed-motive *426framework. Boeing fired the plaintiffs for what it deemed a serious act of racial harassment; whether or not race contributed to that interpretation of the event, and whether or not it was correct, there is no evidence that Boeing was motivated in any way by “discriminatory animus.” Fuentes, 32 F.3d at 765.
IY. Conclusion
Boeing asserts that it fired the plaintiffs because they intentionally posed for a workplace photograph dressed as the KKK, which violates Boeing policy. No reasonable jury could find that this is a pretext, and that Boeing instead fired the plaintiffs because of animus toward Caucasians and Native Americans.
Summary judgment will be entered in favor of Boeing. An implementing order follows.
ORDER AND JUDGMENT
AND NOW, this 13th day of May, 2014, having considered Defendant’s Motion for Summary Judgment (Doc. 29), Plaintiffs’ responses (Docs. 30, 32, 34), and Defendant’s Reply (Doc. 31), and having held oral argument, it is hereby ORDERED, for the reasons explained in the accompanying Memorandum, that the motion (Doc. 29) is GRANTED.
IT IS FURTHER ORDERED that:
1. JUDGMENT is entered in favor of Defendant, The Boeing Company, and against Plaintiffs Zachary Barker, Francis X. Boyd, Jr. and David W. Smith.
2. The Clerk of Court shall mark this action CLOSED for statistical purposes.
. Where the record includes conflicting evidence, the facts are presented in the light most favorable to the plaintiffs, as the summary judgment analysis requires. See, e.g., Zimmerman v. Norfolk S. Corp., 706 F.3d 170, 176 (3d Cir.2013).
. This case was initially filed by Barker alone. He alleged two counts of discrimination, one on the basis of his race (Native American) and one on the basis of his perceived race (Caucasian), as well as a cursory claim of retaliation. See Doc. 1. The perceived-race discrimination claim and retaliation claim have been dismissed. See Doc. 9. Barker’s suit was subsequently consolidated with a separate suit filed by Boyd and Smith. See Doc. 24.
. The complete prima facie case as described in Makky has four components: A plaintiff must show that
(1) s/he is a member of a protected class; (2) s/he was qualified for the position s/he sought to attain or retain; (3) s/he suffered an adverse employment action; and (4) the action occurred under circumstances that could give rise to an inference of intentional discrimination.
541 F.3d at 214. I omit components (1) and (2) because (2) is not disputed in this case and (1) is not actually required. See Iadimarco, 190 F.3d at 163; see also Sorullo v. USPS, 352 F.3d 789, 798 (3d Cir.2003) ("The central focus of the prima facie case is always whether the employer is treating some people less favorably than others because of their race, color, religion, sex, or national origin.”) (citation and internal quotations omitted).
. Boeing argues that the relevant comparator for Smith and Boyd was Barker, who is Native American but was treated exactly ás they were. According to Boeing, this demon*424strates that race was not a factor in the decision-making process. The argument is not compelling. Barker is light-skinned, and to the extent that the plaintiffs’ claim has any plausibility, it is premised on the fact that Kenta Smith is black and the plaintiffs are not (it is a reverse discrimination claim). It is irrelevant to that claim that Barker is Native American.
. Kowalski is an ERISA retaliation case that Boyd and Smith invoke. The employer in Kowalski had purportedly fired the plaintiff for fraudulently claiming medical leave and benefits, and claimed to have relied on an internal investigatory report documenting her fraud. The plaintiff alleged that she had actually been fired for taking legitimate leave and that the accusation of fraud was a cover-up. Given that the employer had never offered the investigatory report into the record, the Third Circuit found that there was a genuine factual dispute over whether the employer's proffered reason was the true one. Id. at 1290. The Court also noted evidence suggesting that there had been no reason for the fraud investigation, that the reasons given had changed over time, and that the report’s factual conclusions were highly suspect. Id.
. Id. (”[W]here the contents of the primary piece of evidence upon which the defendant relies is contradicted by witness testimony and is not even introduced,” the Court concluded, "summary judgment is inappropriate.”).
. Brown held that the mixed-motive framework announced in Price Waterhouse for Title VII claims is applicable in § 1981 discrimination claims, but that subsequent Congressional amendments to Title VII and the Supreme Court's construction of them in Desert Palace, Inc. v. Costa, 539 U.S. 90, 123 S.Ct. 2148, 156 L.Ed.2d 84 (2003) and Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 179, 129 S.Ct. 2343, 174 L.Ed.2d 119 (2009), are not. See 581 F.3d at 182 & n. 5; but see id. at 185 (Jordan, J., concurring) (expressing qualms about this aspect of the majority opinion). | 01-04-2023 | 07-25-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/7224473/ | MEMORANDUM OPINION
TUCKER, Chief Judge.
Currently pending before the Court is Oxford Investments, L.P.’s Motion for *446Summary Judgment (Doc. 71), the City of Philadelphia and the Philadelphia Zoning Board of Adjustment’s Motion for Summary Judgment (Doc. 70), and all responses thereto. For the reasons more fully set forth below, the Court will deny Oxford’s motion in its entirety, grant Defendants’ motion in its entirety, and dismiss all of Oxford’s claims.
I.Factual History 1
This is an action filed by Oxford Investments, L.P. (“Oxford”)2 against the City of Philadelphia and The Philadelphia Zoning Board of Adjustment (“ZBA”) (collectively “Defendants”)3 alleging discrimination against individuals with disabilities, and violations of the Federal Fair Housing Act (“FHA”) and its Amendments, 42 U.S.C. § 3604(f)(1)(b) and Section 3603(f)(3)(b), inter alia,4 Oxford’s claims arise from the Defendants’ refusal to permit Oxford to increase the number of residents housed at its facility located at 1917-23 West Oxford Street, Philadelphia, PA (“the Property”), from 44 residents to 88 residents. (Stmt. Stip. Facts at ¶ 1.) Defendants’ refusal to allow Oxford to house these additional residents, and Defendants’ alleged discriminatory reasons behind its refusal, form the core of this case.
Oxford and its tenant, Minsec, were the operators of the Property in 2007. (Oxford Mot. Summ. J. at 5.) On July 26, 2007 Oxford applied to L & I for a Zoning/Use Registration Permit to allow Oxford to increase the number of residents housed at the Property from 44 residents to 88 residents. (Stmt. Stip. Facts at ¶ 1.) Oxford asserted that the additional residents it sought to house included persons referred to it through the courts. (Id.) On August 7, 2007, L & I refused to grant Oxford’s requested permit because it determined that, if granted, the Property would be used as a private penal and correctional facility, a use not permitted at the Property as it was currently zoned. (Stmt. Stip. Facts at ¶ 3.) On August 9, 2007, Minsec submitted a request for a reasonable accommodation under the FHA with L & I to permit Oxford to increase the residents housed at the property from 44 residents to 88 residents because, “the individuals who reside in the facility suffer from drug and/or alcohol addiction, and some are mentally ill.” (Stmt. Stip. Facts at ¶¶ 5-6.) The request stated that Oxford was the applicant. (Stmt. Stip. Facts at ¶ 6.) L & I denied Oxford’s FHA request. (Stmt. Stip. Facts at ¶ 7.)
After receiving the FHA denial from L & I, Oxford appealed to the ZBA. (Stmt. Stip. Facts at ¶8.) Oxford’s petition for appeal filed with the ZBA noted four reasons for its appeal, including, “(1) the denial of the FHA Request was discriminatory and violated the FHA; (2) the Zoning Code violates the FHA by discriminating against individuals with disabilities; (3) the *447zoning refusal is erroneous, and Oxford should have received a permit as a matter of right; and (4) the granting of an FHA accommodation is appropriate and not an undue burden.” (Stmt. Stip. Facts at ¶ 8.) The ZBA held a hearing on Oxford’s appeal on February 24, 2009. (Oxford’s Mot. Summ. J. at Ex. H.) At the hearing, Oxford presented several witnesses. (Id.) Also present at the meeting were several community organizers who were opposed to Oxford’s request. (Id.) After the close of the meeting, the ZBA prepared findings of fact and conclusions of law with regard to Oxford’s request. (Oxford’s Mot. Summ. J. at Ex. I.) The ZBA denied Oxford’s appeal on May 5, 2009. (Stmt. Stip. Facts at ¶ 10.)
Following the ZBA’s denial, on May 14, 2009, Oxford filed a statutory appeal to the First Judicial District of Pennsylvania, Court of Common Pleas. (Stmt. Stip. Facts at ¶ 11.) Oxford also filed the instant suit on July 28, 2009. (Stmt. Stip. Facts at ¶ 13.) During the pendency of the Federal Court action, Oxford’s claims were dismissed by the Common Pleas Court on February 28, 2011. Oxford Investments, L.P. v. Philadelphia Zoning Board of Adjustment, 2011 WL 1097091, 2011 Phila.Ct.Com.Pl. LEXIS 58 (Pa.C.P. 2011). Oxford filed an appeal of this decision to the Commonwealth Court of Pennsylvania. (Stmt. Stip. Facts at ¶ 15.) The Commonwealth Court granted Oxford a stay of this appeal on March 23, 2011. (Stmt. Stip. Facts at ¶ 16.)
II. Legal Standard
Under the Federal Rules of Civil Procedure, a party is entitled to judgment as a matter of law where, upon making the appropriate motion under Fed.R.Civ.P. 56(a), the movant shows that there is “no genuine dispute as to any material fact”. Fed.R.Civ.P. 56(c). “Facts that could alter the outcome are ‘material,’ and disputes are ‘genuine’ if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct.” Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 743 (3d Cir.1996). The burden of proof rests originally with the movant to show the lack of dispute as to a material fact, and must do so by citing to specific portions of the record which demonstrate the movant’s entitlement to judgment under Fed.R.Civ.P. 56. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To determine whether a movant has demonstrated that there are no genuine issues of material fact, a court must first consider the evidence presented by the moving party and draw all reasonable inferences in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
For claims or defenses where the mov-ant bears the burden of proof at trial, a movant “must show that it has produced enough evidence to support the findings of fact necessary to win.” El v. Se. Pennsylvania Transp. Auth. (SEPTA), 479 F.3d 232, 237 (3d Cir.2007). For claims or defenses that the non-movant bears the burden of proof at trial, a movant can simply point out “that there is an absence of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325, 106 S.Ct. 2548. Once the movant has met its burden of proof under summary judgment, the opposing party “must point to actual evidence in the record on which a jury could decide an issue of fact its way.” El, 479 F.3d at 238.
In order to survive summary judgment, the party opposing summary judgment must raise, “more than a mere scintilla of evidence in its favor.” Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d *448Cir.1989). The party opposing summary judgment must cite specific evidence in the record and may not, “rest solely on assertions made in the pleadings, legal memo-randa, or oral argument.” Berckeley Inv. Group, Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir.2006) (describing this phase of-summary judgment as “put up or shut up time for the non-moving party”). Reliance upon “conclusory, self-serving affidavits [is] insufficient to withstand a motion for summary judgment.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 161 (3d Cir.2009). Both movant and the party opposing summary judgment must cite to evidence in the record that would be admissible at the time of trial. Reiff v. Marks, 2011 WL 666139 at *4 (E.D.Pa. Feb. 23, 2011) (Rufe, J.). In deciding a motion for summary judgment, the court is limited to determining if there is a genuine issue as to a material fact requiring resolution by the finder of fact at trial. See Jiminez v. All American Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir.2007). The court does not weigh evidence or determine the truth in deciding if summary judgment is warranted. Id.
III. Discussion
A. The Legal Effect of the Previous Litigation
Before addressing the merits of Oxford’s claims, the Court must address the arguments regarding the preclusive effect of previous litigation between the parties. Under the operation of the Constitution’s Full Faith and Credit Clause, state courts are required to give preclusive effect to judgments rendered by the courts of other States. U.S. CONST., ART. IV, § 1. Though not bound by the Full Faith and Credit Clause, 28 U.S.C. § 1738 requires Federal Courts to give preclusive effect to state court judgments using “the same preclusion rules as would the courts of that state.” Gage v. Warren Twp. Comm. & Planning Bd. Members, 463 Fed.Appx. 68, 71 (3d Cir.2012) (quoting Edmundson v. Borough of Kennett Square, 4 F.3d 186, 189 (3d Cir.1993)). In this case, the Court applies Pennsylvania preclusion law to determine if Oxford is precluded from presenting any claims or issues raised in previous litigation with the Defendants. Sheddy Family Trust ex rel. Sheddy v. Piatt Twp., 404 Fed.Appx. 629, 631 (3d Cir.2010).
Prior to filing the instant case, on May 14, 2009 Oxford filed a statutory appeal in the First Judicial District of Pennsylvania, Court of Common Pleas appealing the decision of the ZBA. (Stmt. Stip. Facts at ¶ 11.) On February 28, 2011 the Honorable Paul P. Panepinto issued a memorandum opinion affirming the decision of the ZBA, and dismissing Oxford’s appeal. Oxford Investments, L.P. v. Philadelphia Zoning Board of Adjustment, 2011 WL 1097091, 2011 Phila.Ct.Com.Pl. LEXIS 58 (Pa.C.P.2011). Judge Panepinto’s Opinion fully detailed the court’s reasoning and holdings, and made specific findings of fact and conclusions of law given the record as produced at the ZBA hearing.
1. Res Judicata
Res judicata stands for the somewhat simplistic conclusion that, “where a final judgment on the merits exists, a future lawsuit on the same cause of action is precluded.” J.S. v. Bethlehem Area School District, 794 A.2d 936, 939 (Pa.Cmmw.2002). Pennsylvania courts generally apply res judicata narrowly in zoning matters. Callowhill Ctr. Associates, LLC v. Zoning Bd. of Adjustment, 2 A.3d 802, 809 (Pa.Commw.Ct.2010) (noting “the need for flexibility outweighs the risk of repetitive litigation,” in zoning cases.). Nevertheless, res judicata bars any two claims that share: (1) Identity in the thing sued upon; (2) Identity in the cause of *449action; (3) Identity of the parties to the action; and (4) Identity of the capacity of the parties to be sued. Id.; see also Gatling v. Eaton Corp., 807 A.2d 283, 287 (Pa.Super.2002). Res judicata functions to bar issues that were actually raised in the previous litigation as well as “those which could or should have been raised but were not.” Glynn v. Glynn, 789 A.2d 242, 250 (Pa.Super.2001); see also Kelly v. Kelly, 887 A.2d 788, 792 (Pa.Super.Ct.2005) (holding that a party cannot escape preclusion under the principle of res judicata “by varying the form of action or adopting a different method of presenting his case ... ”). Most importantly, “res judicata will ‘not be defeated by minor differences of form, parties or allegations’ where the ‘controlling issues have been resolved in a prior proceeding in which the present parties had an opportunity to appear and assert their rights.’ ” Regscan, Inc. v. Brewer, CIV.A.04-6043, 2006 WL 401852, at *5 (E.D.Pa. Feb. 17, 2006) aff'd, 289 Fed.Appx. 488 (3d Cir.2008) (citing Massullo v. Hamburg, Rubin, Mullin, Maxwell & Lupin, P.C., 1999 WL 313830, at *5 (E.D.Pa. May 17, 1999)).
Defendants contend that res judicata bars this suit because the state court already adjudicated Oxford’s claims. Oxford responds that, because it sought relief before the Court of Common Pleas pursuant to its right to a statutory appeal of the Zoning Board’s decision, res judicata is inapplicable and its claims must be considered. Oxford relies on the Western District of Pennsylvania’s decision in Brown v. Tucci, 960 F.Supp.2d 544 (W.D.Pa.2013) to support this proposition.5 In Brown, the court considered whether plaintiffs statutory appeal of a local agency’s decision to the Court of Common Pleas constituted a “civil action” for claim preclusion purposes. Answering in the negative, the court determined that:
Under Pennsylvania law, a statutory appeal does not constitute a civil action governed by the Pennsylvania Rules of Civil Procedure. It is treated as a “part of the administrative agency process” rather than as a “lawsuit.” A reviewing court is constrained by statutory standards of review. 2 PA. CONS. STAT. §§ 753-754.
Brown, 960 F.Supp.2d at 571 (citations omitted) (internal quotation marks omitted). The Brown court thereafter declined to apply res judicata to plaintiffs claims in his federal suit.
This Court agrees with Oxford that the state court in the instant case considered this matter pursuant to Oxford’s statutory appeal of the Zoning Board’s decision. Therefore, under Brown, the statutory appeal was not a “civil action,” and Oxford’s claims would not be precluded. The Court also notes, however, that a number of Pennsylvania courts have, in contrast to Brown’s holding, applied res judicata principles where claims were initially brought in a statutory appeal. See, e.g., Black v. City of Pittsburgh, CIV.A. 12-1286, 2013 WL 4041966 (W.D.Pa. Aug. 7, 2013) (“The Court agrees that, because federal courts are required to give preclusive effect to the adverse decision of the Court of Common Pleas of Allegheny County affirming *450the decision of the Civil Service Commission, Plaintiffs claims are wholly insubstantial and frivolous.”); Koynok v. Lloyd, 06CV1200, 2010 WL 883714 (W.D.Pa. Mar. 5, 2010) aff'd, 405 Fed.Appx. 679 (3d Cir.2011) (determining that findings of state court pursuant to statutory appeals should be given preclusive effect); DeGenes v. Allegheny Cnty. Dist. Atty., 654 C.D. 2013, 2013 WL 5777884 (Pa.Commw.Ct. Oct. 25, 2013) (“Next, as to Degenes’ claims that Streily misled him as to the appeal process under the RTKL and that he is entitled to the requested records, we agree with Judge O’Reilly that these matters have already been addressed by Judge O’Brien in Degenes’ statutory appeal and that De-genes’ claims are barred under the doctrine of res judicata.”); Takacs v. Indian Lake Borough, 10 A.3d 416 (Pa.Commw.Ct.2010) (considering application of res judicata to claims brought in statutory appeal). Therefore, this Court concludes that whether res judicata applies to preclude claims brought in a statutory appeal is still an unsettled issue under Pennsylvania law. Because this Court holds that Oxford’s action is barred by collateral estoppel and on the merits, as discussed infra, it declines to resolve this issue at this time, and will proceed in its analysis.
2. Collateral Estoppel
Grounded in the policy that “a losing litigant deserves no rematch after a defeat fairly suffered, in adversarial proceedings, on an issue identical in substance to the one he subsequently seeks to raise,” collateral estoppel prevents parties from relitigating issues of fact and questions of law previously ruled upon in a prior action. In re MDC Sys., Inc., 488 B.R. 74, 91 (Bankr.E.D.Pa.2013) (quoting Dici v. Commw. of Pa., 91 F.3d 542, 547 (3d Cir.1996)); see also Callowhill Ctr. Associates, 2 A.3d 802, 809 (Pa.Commw.Ct.2010) (citing City of Pittsburgh v. Zoning Board of Adjustment, 522 Pa. 44, 559 A.2d 896 (1989)). In Pennsylvania, collatéral estop-pel applies where: (1) An issue decided in a prior action is identical to one presented in a later action; (2) The prior action resulted in a final judgment on the merits; (3) The party against whom collateral es-toppel is asserted was a party to the prior action, or is in privity with a party to the prior action; and (4) The party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior action. Rue v. K-Mart Corp., 552 Pa. 13, 713 A.2d 82, 84 (1998).
Though related to res judicata, collateral estoppel is a broader concept than true res judicata and operates any time there is a “prior adjudication6 of an issue in another action that is determined to be sufficiently firm to be accorded preclusive effect.” Greenleaf v. Garlock, Inc., 174 F.3d 352, 358 (3d Cir.1999) (citing Restatement (Second) of Judgments § 13 (1982)); see also Vignola v. Vignola, 39 A.3d 390, 393 (Pa.Super.Ct.2012) appeal denied, 616 Pa. 660, 50 A.3d 126 (2012). “Application of the principle of collateral estoppel is not precluded merely because administrative proceedings are involved”; rather, where an agency acts in a “judicial capacity and resolves disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate,” courts *451should not “hesitate to apply collateral es-toppel principles”. Christopher v. Council of Plymouth Twp., 160 Pa.Cmwlth. 670, 635 A.2d 749, 752 n. 2 (1993).7
In the instant matter, the previous state court litigation resulted in a final judgment on the merits,8 Oxford was a party to that litigation, and Oxford had a full and fair opportunity to litigate those claims in state court. Thus, to the extent that Oxford presents essential issues of fact or questions of law that it raised unsuccessfully in the state court litigation, it is precluded from seeking a more favorable ruling on those issues before this Court.
Oxford’s briefing to the state court is highly relevant to determining what issues Oxford placed at issue in the state court litigation. In defining the issues for the state court, Oxford identified two main “questions presented” to that court. 'The first question Oxford identifies as being contested in the state court litigation is:
Should this Court find that L & I and the Zoning Board erred in failing to classify the existing use as a transitional housing facility rather than a prison where the residents are not confined to the premises and L & I previously labeled the exact same use as a transitional housing facility, and had issued a Certificate of Occupancy for the use in the past?
(Defs.’ Mem. of Law in Opp’n at Ex. B at 11.) Oxford also identifies a second issue contested below as being:
Should this Court rule that L & I and the Zoning Board erred in failing to grant a reasonable accommodation under the FHA to Appellants where they presented uncontradicted evidence that the Property was constructed for 88 residents and the transitional housing use, which was permitted in the applicable zoning district, was unfairly classified otherwise as a prison, and where the City presented no evidence whatsoever that the granting of the accommodation would present an undue burden on its zoning scheme?
(Defs.’ Mem. of Law in Opp’n at Ex. B at 11.) Furthermore, Oxford presented the following “Concise Statement of Matters Complained of on Appeal” to the state court:
1. The trial court erred in affirming the [ZBA] ... where the Zoning Board and the Department of Licenses and Inspections (“L & I”) violated the Federal Fair Housing Act (“FHA”) ... the Americans With Disabilities Act (“ADA”), ... and the Rehabilitation Act ... in the following ways: (1) by failing to find that Minsec’s use at the property located at 1917-23 Oxford Street in the City of Philadelphia (the “Property”) was permitted by the Zoning Code; (2) by failing to find that the increase in population for the use at the Property deserved a reasonable accommodation under the FHA; and (3) by failing to find that the provisions of the Philadelphia Zoning Code were ap*452plied in a discriminatory manner against individuals at the Property on the basis of their, [sic] disability.
2. The trial court erred in failing to find that Minsec was entitled to an as of right permit from the City of Philadelphia because the use at the property was permitted under the Zoning Code, and/or was a continuation of a pre-existing non-conforming use.
3. The trial court erred in failing to find that the use of the Property was a valid pre-existing nori-con-forming use, legally allowed to operate at the Property.
4. The trial court erred in failing to find that L & I erred in defining the use at the Property as a private prison.
5. The trial court erred in failing to find that L & I erred in including blatantly inaccurate information in the Zoning Refusal.
6. The trial court erred in failing to find that the official Findings of Fact and Conclusions of Law of the Zoning Board contained multiple errors of law and discriminated against individuals with disabilities under the FHA.
7. The trial court erred in failing to find that the official Findings of Fact and Conclusions of Law of the Zoning Board were not supported by substantial evidence.
8. The trial court erred in failing to . find that Minsec was entitled to a reasonable accommodation under the FHA where the City failed to. contest the requested accommodation before the Zoning Board and thus waived any right to contest the accommodation.
9. The trial court erred in failing to find that the Zoning Board erred by considering community opposition when considering a reasonable accommodation under the FHA.
10. The trial court erred in failing to find that L & I and the Zoning Board erred in defining the use at the Property as a private prison.
Oxford Investments, L.P. v. Philadelphia Zoning Board of Adjustment, 2011 WL 1097091, 2011 Phila.Ct.Com.Pl. LEXIS 58 (Pa.C.P.2011) (citations omitted).
In ruling on these contested issues presented by Oxford, the state court issued a detailed opinion that addressed many of the same issues Oxford is currently attempting to litigate before this court. For example, Oxford raised, and the state court ruled in favor of the Defendants on, the disputed factual issue of whether or not the Property was entitled to a use permit as a “Rooming and Boarding' House” under Zoning Code § 14 — 303(2)(a), or was a private penal institution under Zoning Code § 14-102(90). The state court held that the evidence produced by Oxford was insufficient to warrant a use permit as a “Rooming and Boarding House” as of right. Oxford Investments, L.P. v. Philadelphia Zoning Board of Adjustment, 2011 WL 1097091, 2011 Phila.Ct.Com.Pl. LEXIS 58, at *7-8. Oxford also raised, 'and the state court ruled in favor of the Defendants on, the issue of whether or not the evidence before the ZBA sufficiently alleged that Oxford’s potential residents were handicapped individuals under the FHA. Id. 2011 WL 1097091, 2011 Phila.Ct.Com.PL LEXIS 58, at *10. Finally, Oxford raised, and the state court ruled in Defendants’ favor on, the issue of whether Oxford’s accommodation was actually necessary to provide disabled residents with an equal opportunity to use and enjoy the property. Each of these rulings *453constitutes an adverse ruling by the state court on essential elements of Oxford’s FHA claims. Therefore, the state court’s ruling against Oxford on each of these issues represents a fatal blow to each of Oxford’s FHA claims.
Because the state court already ruled against Oxford on these vital issues, Oxford is precluded from presenting them again to this Court in the hopes of receiving a different result. As the precluded issues are necessary elements in each of Oxford’s FHA claims, the ultimate effect of the preclusion requires dismissal of all of Oxford’s claims.
3. Failure to Appear at the ZBA
Finally, the Court briefly addresses Oxford’s repeated assertion that Defendants’ failure to attend the ZBA hearing has waived any opposition to the positions advanced by Oxford at that hearing. The Court need spend little time on this argument as Oxford has quoted contrary authority to the Court in its summary judgment brief. (Oxford Mot. Summ. J. at 18.) In its briefing to the Court, Oxford points the Court to a quotation from Leoni v. Whitpain Township Zoning Hearing Board, 709 A.2d 999 (Pa.Commw.) appeal denied 557 Pa. 642, 732 A.2d 1211 (1998), in which the Commonwealth Court of Pennsylvania held “that any appellant, other than a municipality, must first appear before the zoning board and raise an objection in order to pursue a meaningful appeal.” (emphasis added). Under Pennsylvania law, municipalities, such as Defendants, are not required to attend zoning hearings as a prerequisite to an appeal. 53 Pa. Stat. Ann. § 13131.1 (West) (“In addition to any aggrieved person, the governing body vested, with legislative powers under any charter adopted pursuant to this act shall have standing to appeal any decision of a zoning hearing board or other board or commission created to regulate development within the city.”); accord Lower Paxton Twp. v. Fieseler Neon Signs, 37 Pa.Cmwlth. 506, 391 A.2d 720, 723 (1978) (“[Appellee] contends that the Township waived its right to appeal by not participating in the proceedings before the zoning board. We strongly disagree. To impose the burden of requiring a municipality to participate in every hearing for a variance lest it waive its right to challenge the zoning board’s action would be unreasonable.”).
As Oxford’s own authority holds that municipalities are not required to attend zoning hearings, Defendants’ failure to attend Oxford’s ZBA hearing does not waive any of Defendants’ arguments before this Court.
B. Alleged Violations of the FHA
Even if the Court were to consider the issues precluded by the previous litigation, Oxford’s substantive claims are all without merit. Oxford advances four distinct claims under the FHA: disparate treatment: discriminatory classification-labeling the use at the property a penal institution, disparate treatment: discriminatory classification-failure to define the use at the property as a permitted use (transitional housing facility or rooming house), disparate impact-treating transitional housing facilities as penal institutions discriminates against disabled individuals, and a failure to grant a reasonable accommodation. (Compl. at ¶¶ 36-80.) Because Oxford has failed to support each of these claims, and failed to demonstrate that its residents were actually handicapped, Summary Judgment in Defendants’ favor is warranted.
1. Discrimination “Because of a Handicap”
Underlying all of Oxford’s claims is the requirement under the FHA that Defendants discriminated against the Resi*454dents “because of a handicap.” 42 U.S.C. § 3604(f). Oxford has failed to demonstrate any of its potential residents meet the statutory definition of handicapped. As such, summary judgment in favor of Defendants is appropriate.
The FHA defines a handicap as “(1) a physical or mental impairment which substantially limits one or more of [a] person’s major life activities, (2) a record of having such an impairment, or (3) being regarded as having such an impairment.” Cmty. Servs., Inc. v. Wind Gap Mun. Auth., 421 F.3d 170, 179 (3d Cir.2005) (quoting 42 U.S.C. § 3602(h)). Drug addiction and alcoholism are both recognized as potential handicaps where the addiction substantially limits a major life activity. 24 C.F.R. § 100.201; see also McKivitz v. Twp. of Stowe, 769 F.Supp.2d 803, 823 (W.D.Pa.2010) (“recovering alcoholics and drug addicts can sometimes qualify as handicapped individuals under the FHA, provided that they are not currently using illegal drugs.”) (internal quotations omitted) (quoting Lakeside Resort Enterprises, LP v. Bd. of Sup’rs of Palmyra Twp., 455 F.3d 154, 156 n. 5 (3d Cir.2006)).
Oxford has presented voluminous record evidence that establishes that a large majority of potential residents of the Property suffer from physical or mental impairments in the form of addiction to drugs and alcohol and/or the residents are mentally ill. (Stmt. Stip. Facts at ¶ 5.) Oxford offers no record evidence, however, to support a finding that these impairments “substantially limit” a “major life activity,” as is required to find the existence of a handicap. See, e.g., Cohen v. Twp. of Cheltenham, Pennsylvania, 174 F.Supp.2d 307, 329 (E.D.Pa.2001) (“Plaintiffs in this case produced no evidence showing how any of the impairments alleged in their submissions might substantially limit major life activities. Their arguments are limited to mere conclusory statements that an impairment meets the definition of handicap.”); Oxford House, Inc. v. Twp. of Cherry Hill, 799 F.Supp. 450, 460 (D.N.J.1992) (“[T]he second step of the analysisf, whether the impairment substantially limits a major life activity,] cannot be reached as a matter of law but must rest instead on some specific factual showing that a plaintiffs alcoholism or drug addiction ‘substantially limits [a] major life activity.’ ”). With no direct or circumstantial evidence to demonstrate a substantial limitation of the potential residents’ major life activities, Oxford’s claim requires the Court to assume that all recovering addicts are handicapped. Such an analysis clearly conflicts with the Supreme Court’s directive to conduct individualized disability assessments and is fatal to all of Oxford’s FHA claims. Cf. Cohen, 174 F.Supp.2d at 328 (“With this record, plaintiffs are essentially asking the Court to find that because abused, abandoned, and/or neglected children might generally be handicapped, the children at issue in this case would in fact be handicapped.”).9
2. Disparate Treatment
“To prevail on a disparate treatment claim, a plaintiff must demonstrate that some discriminatory purpose was a ‘motivating factor’ behind the challenged action.” Wind Gap Mun. Auth., 421 F.3d at 177. The discriminatory purpose need not be motivated by hostility or animus towards a particular handicap, “[t]he plaintiff is only required to ‘show that a protected characteristic played a role in the defendant’s decision to treat her differently.’ ” Id. (quoting Cmty. Hous. Trust v. *455Dep’t of Consumer & Regulatory Affairs, 257 F.Supp.2d 208, 225 (D.D.C.2003)).
a) Classification as a Private Penal Institution
Oxford’s initial disparate treatment claim revolves around the decision of the ZBA to classify the Property as a private penal institution. Specifically, Oxford alleges that Defendants applied the provisions of the zoning code so as to disadvantage the potential residents because of their status as addicts. Because Oxford offers nothing in the way of direct or circumstantial evidence of such discriminatory treatment by - Defendants, the Court will dismiss these claims.
Philadelphia Zoning Code § 14-102(90) (2011) defines a private penal institution as:
An institution operated by a private party under contract with the City of Philadelphia, the Commonwealth of Pennsylvania or the federal government for the confinement of offenders sentenced by a court and still under the jurisdiction of a court.
Oxford suggests that the Defendants unreasonably labeled their facility as a private penal institution despite the fact that Oxford presented evidence that the residents were not “confined” to the Property.10
Despite the record evidence presented by Oxford at the zoning hearing, the ZBA was under no duty to accept Oxford’s evidence as true, even if uncon-troverted. Constantino v. Zoning Hearing Bd. of Borough of Forest Hills, 152 Pa.Cmwlth. 258, 618 A.2d 1193, 1196 (1992) (“The Board as factfinder is the sole judge of credibility and conflict in testimony and has the power to reject even uncontradict-ed testimony if the Board finds the testimony lacking in credibility.”); see also Choe v. Philadelphia Bd. of License & Inspection, 847 A.2d 214, 216 n. 5 (Pa.Commw.Ct.2004). Additionally, “It is well established that a zoning board’s interpretation of its zoning ordinance is to be given great weight as representing the construction of a statute by the agency charged with its execution and application.” In re Brickstone Realty Corp., 789 A.2d 333, 339 (Pa.Commw.Ct.2001).
Here, there was ample record evidence to support the ZBA’s decision to disbelieve the testimony of Oxford representatives, and classify the Property as a private penal institution. As the ZBA noted in its findings of fact (Oxford’s Mot. Summ. J. at Ex. I), Oxford witnesses routinely offered testimony that conflicted with the testimony of other witnesses and the documents submitted to the ZBA. The ZBA was under no duty to simply ignore the evidence and repeated testimony of Oxford witnesses classifying the Property as a community correctional center. Thus, Oxford has failed to demonstrate that the Defendants’ decision to label the Property a “private penal institution” was motivated by discriminatory animus towards recovering addicts.
For many of the same reasons, Defendants’ refusal to label the property as a “transitional housing facility” or “rooming house”, permitted in the C-2 zone where the Property is located, does not evince a discriminatory animus. Simply put, a private penal institution is not comparable to a private rehabilitation facility. “The expected impact of a home-based business is not comparable to that of a community *456corrections center for up to 20 state parolees or persons under the jurisdiction of the Department of Corrections (DOC), Bureau of Community Corrections.” Geneva House, Inc. v. Minsec of Scranton, Inc., 25 A.3d 427, 436 (Pa.Commw.Ct.2011). The ZBA’s refusal to ignore a grossly different use of the property, namely housing persons referred through the court system, does not evince a discriminatory animus or paternalistic view of addicts, even in the light most favorable to Oxford. To the contrary, the record evidence demonstrates that the City acted in accordance with its facially neutral zoning code.
Because Oxford has failed to show that Defendants acted with a discriminatory purpose, its disparate treatment claims must fail.
b) Community Statements at the ZBA Hearing
Oxford also asserts that statements made by community members at the Zoning Board tainted the ZBA’s decision. (Oxford Mot. Summ. J. at 20-21.) In this regard, Oxford relies primarily on a District of Columbia District Court case, Community Housing Trust v. Department of Consumer & Regulatory Affairs, 257 F.Supp.2d 208 (D.D.C.2003). In Community Housing Trust the court was confronted with neighborhood opposition expressing “their fears and anxieties about living in close proximity to Zeke’s House’s mentally ill residents.” Id. at 213 (emphasis added). The neighborhood opposition eventually included multiple newspaper editorials, petitions, e-mails to zoning board members, and eventually the Mayor of the District of Columbia became involved in the dispute. Id. at 213-214. Ultimately, the court in Community Housing Trust found the decision of the zoning board to be influenced by “strong, discriminatory opposition” on the part of the community. Id. at 226-227. Unlike the situation in Community Housing Trust, there is simply no record evidence, even in the light most favorable to Oxford, that permits the court to find that the neighborhood opposition to Oxford was the result of “strong, discriminatory animus” against recovering alcoholics and drug addicts. To the contrary, as the ZBA noted in its findings of fact, the community opposition to this project had everything to do with the Property’s status as a correctional facility and nothing to do with the fact that the residents were recovering addicts. (Oxford Mot. Summ. J. at Ex. I at ¶ 58.) Here, unlike in Community Housing Trust, there is no inference of discrimination because community opposition to Oxford’s request to the ZBA was not motivated by a discriminatory animus towards addicts. Cf. Community Housing Trust, 257 F.Supp.2d at 227; see also Cmty. Servs., Inc. v. Heidelberg Twp., 439 F.Supp.2d 380, 396 (M.D.Pa.2006) (“Transcripts from the hearing before the Zoning Board reflect significant community concern over the specific nature of the prospective residents’ disabilities. The Board did not seek to allay the pervasive — and perverse — misconceptions, but fostered the acrimony, and requested that private counsel assist.”).
Accordingly, without any evidence of a discriminatory animus towards addicts on the part of the neighborhood opposition, Oxford’s discrimination claim against Defendants fails, and summary judgment in favor of Defendants is appropriate.
3. Disparate Impact
To state a claim for disparate impact, “a plaintiff must prove that defendants’ policies have a greater adverse impact on persons with disabilities than on non-protected persons.” Sharpvisions, Inc. v. Borough of Plum, 475 F.Supp.2d 514, 525 (W.D.Pa.2007). In such a claim, an outwardly neutral practice or law has a *457“significantly adverse or disproportionate impact on persons with disabilities.” Id. “Typically, a disparate impact is demonstrated by statistics, and a prima facie case may be established where gross statistical disparities can be shown.” Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mount Holly, 658 F.3d 375, 382 (3d Cir.2011) (internal citations and quotations omitted).
Here, Oxford offers nothing more than unsupported assertions to support its disparate impact claims. Oxford’s Opposition Brief contains no statistics demonstrating statistical disparities in variances granted by Defendants. The Opposition Brief contains no analysis of any ZBA decision other than the one that is the subject of this lawsuit. Indeed, Oxford supports its disparate impact claim only with statements such as, “The City’s classification of the use at the property as a “private penal institution” therefore discriminated against the disabled residents at the Property and effected a disparate impact upon them in violation of the FHA.” (Oxford’s Opp’n Brief at 15.) This is simply insufficient to state a prima facie claim for disparate impact discrimination. As such, Summary Judgment will be granted in favor of Defendants, and the claim will be dismissed.
4. Reasonable Accommodations Claim
The FHA makes it unlawful “to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap ...” 42 U.S.C. § 3604(f)(2). Cities, and their zoning boards, are not exempt from the requirement to permit reasonable accommodations in their “rules, policies, and practices when reviewing proposals for housing for the handicapped.” Lapid-Laurel, L.L.C. v. Zoning Bd. of Adjustment of Twp. of Scotch Plains, 284 F.3d 442, 449 (3d Cir.2002) (quoting 42 U.S.C. § 3604(f)(3)(B)); see also McKivitz v. Twp. of Stowe, 769 F.Supp.2d 803, 823-24 (W.D.Pa.2010) (“The FHA, the Rehabilitation Act and the ADA are all applicable to zoning decisions.”).
Discrimination is explicitly defined to include “refusals] to make reasonable accommodations in the rules, policies, practices, or services, when such accommodations may be necessary to afford [a handicapped] person equal opportunity to use and enjoy a dwelling.” 42 U.S.C. § 3604(f)(3)(B). Thus, to succeed on a reasonable accommodations claim, a plaintiff must show that the requested accommodation was “(1) reasonable and (2) necessary to (3) afford handicapped persons an equal opportunity to use and enjoy housing.” Lapid-Laurel, 284 F.3d at 457 (quoting Bryant Woods Inn, Inc. v. Howard County, 124 F.3d 597, 603 (4th Cir.1997)).
The Third Circuit utilizes a burden shifting analysis to determine if a plaintiff has stated a prima facie reasonable accommodation claim. Lapid-Laurel, 284 F.3d at 457; see also NHS Human Servs. v. Lower Gwynedd Twp., CIV.A. 11-2074, 2012 WL 170740, at *6 (E.D.Pa. Jan. 20, 2012). A “plaintiff bears the initial burden of showing that the requested accommodation is necessary to afford handicapped persons an equal opportunity to use and enjoy a dwelling ...” Lapid-Laurel, 284 F.3d at 457. To satisfy this initial burden, a plaintiff must demonstrate “a nexus between the reasonable accommodations that he or she is requesting and their necessity for providing handicapped individuals with an equal opportunity to use and enjoy housing.” McKivitz, 769 F.Supp.2d at 825 (quoting Lapid-Laurel, 284 F.3d at 459) (internal punctuation *458omitted). Only after a plaintiff makes this showing does the burden shift, and a defendant is required to demonstrate that the requested accommodation is unreasonable. Id. at 459.
Viewing the evidence in the light most favorable to Oxford, the Court concludes that Oxford has failed to carry its initial burden by demonstrating the requested accommodation was necessary to afford handicapped persons an equal opportunity to use and enjoy the Property. To demonstrate a necessary accommodation, “the FHA requires [Plaintiff] to show that the size of its proposed Facility is required to make it financially viable or medically effective.” Lapid-Laurel, L.L.C., 284 F.3d at 461. Oxford has entirely failed to submit record evidence to demonstrate that increasing the resident population of the Property would create better outcomes for the residents or make the Property fiscally viable. Though Oxford does highlight that the previous operator declared bankruptcy, there is absolutely no indication that Oxford was unable to manage the Property efficiently. Without evidence that the expansion would be necessary to the continued financial viability of the Property, Oxford has failed to demonstrate that the requested accommodation was necessary. Lapid-Laurel, L.L.C., 284 F.3d at 461.
Because Oxford has failed to point to evidence demonstrating that the requested accommodation was necessary, the burden never shifts to Defendants to demonstrate the unreasonability of the accommodation. Accordingly, summary judgment is appropriate in favor of Defendants and the reasonable accommodation claim dismissed.
IV. Conclusion
For the foregoing reasons, this Court denies Oxford’s motion in its entirety, grants Defendants’ motion in its entirety, and dismisses all of Oxford’s claims. An appropriate Order will follow.
ORDER
AND NOW, this _ day of May, 2014, upon consideration of Oxford Investments, L.P.’s (“Plaintiff’) Motion for Summary Judgment (Doc. 71), the City of Philadelphia and the Philadelphia Zoning Board of Adjustment’s (“Defendants”) Motion for Summary Judgment (Doc. 70), and all responses thereto, IT IS HEREBY ORDERED AND DECREED that Plaintiffs Motion is DENIED and Defendants Motion is GRANTED.
. Because the Court writes primarily for the parties, the Court discusses only those facts necessary to its decision.
. Oxford was originally joined in this lawsuit by co-plaintiff Minsec Companies, Inc. ("Min-sec") (Doc. 1). On January 21, 2014, Minsec reached a settlement with Defendants and voluntarily dismissed their claims against Defendants (Doc. 66). The Court granted the voluntary dismissal, and Minsec no longer is a party to this lawsuit (Doc. 67).
. Oxford and Minsec also sued Philadelphia Department of Licenses and Inspections ("L & I”) (Doc. 1). On March 18, 2010, the Court dismissed all claims against L & I on the basis that it did not have a separate legal existence from the City (Doc. 11).
. The Fair Housing Act was amended by the Fair Housing Amendments Act of 1988. To be consistent with the briefings in this matter, the Court will refer to the legislation as the Fair Housing Act ("FHA”).
. Oxford also attempts to apply Brown's holding to bar Defendants' collateral estoppel argument. This defense is unavailing, however, because the Brown court recognized the possibility that the plaintiff there may have been collaterally estopped from presenting issues unsuccessfully litigated in the state agency and appeals process. Brown, 960 F.Supp.2d at 573 ("If Brown had unsuccessfully litigated the constitutionality of his discharge in his appeal to the Court of Common Pleas, he would have most likely been precluded from proceeding with his § 1983 claims against the Defendants in both their official and personal capacities.”)
. "An adjudication’ is defined by the Administrative Agency Law as: '[A]ny final order, decree, decision, determination or ruling by an agency affecting personal or property rights, privileges, immunities, duties, liabilities or obligations of any or all of the parties to the proceedings in which the adjudication is made.' ” Gnagey Gas & Oil Co., Inc. v. Pennsylvania Underground Storage Tank Indemnification Fund, 82 A.3d 485, 507 (Pa.Commw.Ct.2013) (emphasis in original), reconsideration and reargument denied (Jan. 23, 2014).
. Zoning hearing boards act as quasi-judicial bodies under Pennsylvania law. Kennedy v. Upper Milford Twp. Zoning Hearing Bd., 575 Pa. 105, 834 A.2d 1104, 1114 (2003).
. This Court agrees with Defendants that Judge Panepinto's state court decision constitutes a final judgment. See Shaffer v. Smith, 543 Pa. 526, 673 A.2d 872, 874 (1996) ("A judgment is deemed final for purposes of res judicata or collateral estoppel unless or until it is reversed on appeal.”) In addition, Oxford states that it plans to withdraw its appeal of the state court's decision. (PI. Mot. Summ. J. at 11 n. 3.)
. The State Court reached the same determination. Oxford Investments, L.P. v. Philadelphia Zoning Board of Adjustment, 2011 WL 1097091, 2011 Phila.Ct.Com.PL LEXIS 58, at *8-9.
. The parties do not debate that the Property satisfied all other statutory elements of a private penal institution under § 14-102(90). | 01-04-2023 | 07-25-2022 |