Signed May 2, 2007--Memorandum Opinion by Judge Andre M. Davis.
Ronald Williams ("Williams") brought this action against defendants pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 USC § 1001, et seq., to challenege the denial of pension benefits.
The fund's existence predates the enactment of ERISA. Administration and management of the fund is by contract with specialists, with the Board of Trustees setting policies and procedures. The outcome of this case hinges on the proper interpretation and application of one of the Trustees' amendments to the plan. Defendants argue that although contributions were made on behalf of Williams over many years, he failed to vest or otherwise accrue entitlement to those benefits. Williams argues that he is eligible for a pension, albeit a reduced pension, under a 1972 pre-ERISA version of the pension plan. Under the 1972 version, a participant's entitlement to a pension would vest after he or she earned seven years of credit and at least a partial benefit was payable when he or she reached retirement age. If a participant failed to work sufficient hours over a specified period to earn the requisite vesting credit, the participant would not vest and all potential benefits would be subject to forfeiture based on the relevant "break-in-service" rules.
Consequent to an amendment in the vesting schedule, the graduated vesting schedule maintained by the fund in 1972 was rescinded; instead, vesting occurred only after ten years of service. The issue then is whether when the trustees changed the vesting schedule to ten years, they did so before Williams had accrued sufficient vesting credit to gain an entitlement to benefits even under the pre-ERISA pension plan and whether Williams received proper notice of that amendment.
The gravamen of this dispute, therefore, is two-fold: (1) whether the amendment to the vesting schedule became effective on January 1, 1976 or only later, in November 1977, when the amendment to the vesting schedule was embodied in a formal printed restatement of the plan; and (2) whether Williams received notice of the fund's amendment to the vesting schedule in time for him to adjust his work plans so as to secure a pension benefit.
The Court rejected Williams' arguments relating to any potential benefits accrued before the amendment and found the defendants provided proper and sufficient notice of the amendment. Held that the Williams' motion for summary judgment denied and defendant's motion granted.
The full opinion is available in PDF.
Showing posts with label Judge Davis Andre. Show all posts
Showing posts with label Judge Davis Andre. Show all posts
Monday, May 21, 2007
Wednesday, May 16, 2007
McFadden v. Grasmick, et al. (Maryland U.S.D.C.) (Approved for Publication)
Filed May 12, 2007--Opinion and Order by Judge Andre M. Davis.
This is an action brought pursuant to § 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794, Title II of the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et seq., and 42 U.S.C. § 1983, seeking declaratory and injunctive relief in respect to the manner in which defendants, state educational officials and their agents and designees, operate the statewide system of track and field competition in Maryland.
Paralyzed from below her waist, McFadden uses a wheelchair for mobility and, by all accounts, is a world class and Olympic wheelchair racer competing in several events. She contends that defendants unlawfully discriminate against her, as a student athlete who uses a wheelchair, because their rules and protocols for assigning team points in statewide track and field competition preclude her from earning points for her team. She, therefore, seeks a preliminary injunction forbidding defendants from declining to award her one point for the successful completion of her events at the 2007 Spring Tournament.
Based in part on a February 2007 report, a plan for 12 wheelchair racing events were added to the 2007 Spring Tournament. Each wheeler may compete in up to four events, the same limit applicable to non-wheelers. The plan provides that all of the wheelchair races will be conducted on a statewide basis rather than on a class basis. In other words, the 188 secondary schools in Maryland are divided into four classes based on the number of students attending a school. Except in wheelchair race events, a student/team competes only against students in their class. Wheelchair racers (there are only three in the state) compete as a "class" without earning points for his or her team. Defendants defend their decision to assign no team points for the wheelchair races as fully consistent with policy regarding "new team events." When a "new team event" is added to state-sanctioned tournaments, the results of such event do not earn team points in the determination of team championship until high schools representing at least 40% of the jurisdictions in a particular class participate in that event during the regular and post season.
Before a preliminary injunction will issue, four factors must be evaluated: (1) the likelihood of irreperable harm to the plaintiff if the preliminary injunction is denied; (2) the likelihood of harm to the defendant if the requested relief is granted; (3) the likelihood that plaintiff will succeed on the merits; and (4) the public interest. The Court found an extraordinarily close balance of harms between McFadden and the defendants.
However, the Court reasoned, based on the third factor, that the likelihood of McFadden's success on the merits of her claims is sufficiently attenuated that the extraordinary remedy of a preliminary injunction was not justified. McFadden's claims were brought under the ADA and the Rehabilitation Act, for which success requires establishment of a prima facie case by showing that (1) she has a disability, (2) she is otherwise qualified to receive the benefits of a public service program or activity, and (3) she was excluded from participation in or denied the benefits of such service, program or activity, or otherwise discriminated against, on the basis of her disability. The Court found McFadden satisifed the first two elements. However, McFadden expressly agreed that, at the bottom, this is a discrimination case. As to the likelihood of success on the merits, therefore, the dispositive issue is whether McFadden will be able to show at trial that she is being treated less favorably on account of her disability, i.e., whether the constraints on McFadden's ability to earn points for her team differ in any material, legally cognizable way from the constraints on the opportunity of similarly situated students. That answer was "no."
The essence of unlawful discrimination is disparate treatment of two similarly situated individuals on the basis of a prohibited characteristic. As mentioned above, defendants award team points only when schools representing 40% of the students in a particular class participate in any event. Thus, given the limited participation in wheelchair racing at the statewide competiton (again, there are three), McFadden is treated no differently than is any student at any school who participates in any event with insufficient participation. Even though Howard County is the only jurisdiction offering varsity wheelchair racing, and even though only two schools in Howard County have competitors in wheelchair racing, defendants will count all of Howard County's 12 secondary schools toward the 40% minimum needed to elevate wheelchair racing to an event for which team points are awarded.
In sum, it is not likely that, upon a full review of the merits of McFadden's claims, the court will be pursuaded that it is discriminatory under the disability rights statutes for defendants to maintain a difference in the opportunity of wheelchair racers, in contrast to non-wheelchair racers, to earn points for teams, where all but a small number of teams are significantly under-represented in the distinct class of competitors of which McFadden is the sole member: wheelers. Accordingly, McFadden's request for preliminary injunction does not satisfy the long-standing criteria applicable to such efforts and the motion is denied.
The full opinion is available in PDF.
This is an action brought pursuant to § 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794, Title II of the Americans with Disabilities Act, 42 U.S.C. §§ 12101, et seq., and 42 U.S.C. § 1983, seeking declaratory and injunctive relief in respect to the manner in which defendants, state educational officials and their agents and designees, operate the statewide system of track and field competition in Maryland.
Paralyzed from below her waist, McFadden uses a wheelchair for mobility and, by all accounts, is a world class and Olympic wheelchair racer competing in several events. She contends that defendants unlawfully discriminate against her, as a student athlete who uses a wheelchair, because their rules and protocols for assigning team points in statewide track and field competition preclude her from earning points for her team. She, therefore, seeks a preliminary injunction forbidding defendants from declining to award her one point for the successful completion of her events at the 2007 Spring Tournament.
Based in part on a February 2007 report, a plan for 12 wheelchair racing events were added to the 2007 Spring Tournament. Each wheeler may compete in up to four events, the same limit applicable to non-wheelers. The plan provides that all of the wheelchair races will be conducted on a statewide basis rather than on a class basis. In other words, the 188 secondary schools in Maryland are divided into four classes based on the number of students attending a school. Except in wheelchair race events, a student/team competes only against students in their class. Wheelchair racers (there are only three in the state) compete as a "class" without earning points for his or her team. Defendants defend their decision to assign no team points for the wheelchair races as fully consistent with policy regarding "new team events." When a "new team event" is added to state-sanctioned tournaments, the results of such event do not earn team points in the determination of team championship until high schools representing at least 40% of the jurisdictions in a particular class participate in that event during the regular and post season.
Before a preliminary injunction will issue, four factors must be evaluated: (1) the likelihood of irreperable harm to the plaintiff if the preliminary injunction is denied; (2) the likelihood of harm to the defendant if the requested relief is granted; (3) the likelihood that plaintiff will succeed on the merits; and (4) the public interest. The Court found an extraordinarily close balance of harms between McFadden and the defendants.
However, the Court reasoned, based on the third factor, that the likelihood of McFadden's success on the merits of her claims is sufficiently attenuated that the extraordinary remedy of a preliminary injunction was not justified. McFadden's claims were brought under the ADA and the Rehabilitation Act, for which success requires establishment of a prima facie case by showing that (1) she has a disability, (2) she is otherwise qualified to receive the benefits of a public service program or activity, and (3) she was excluded from participation in or denied the benefits of such service, program or activity, or otherwise discriminated against, on the basis of her disability. The Court found McFadden satisifed the first two elements. However, McFadden expressly agreed that, at the bottom, this is a discrimination case. As to the likelihood of success on the merits, therefore, the dispositive issue is whether McFadden will be able to show at trial that she is being treated less favorably on account of her disability, i.e., whether the constraints on McFadden's ability to earn points for her team differ in any material, legally cognizable way from the constraints on the opportunity of similarly situated students. That answer was "no."
The essence of unlawful discrimination is disparate treatment of two similarly situated individuals on the basis of a prohibited characteristic. As mentioned above, defendants award team points only when schools representing 40% of the students in a particular class participate in any event. Thus, given the limited participation in wheelchair racing at the statewide competiton (again, there are three), McFadden is treated no differently than is any student at any school who participates in any event with insufficient participation. Even though Howard County is the only jurisdiction offering varsity wheelchair racing, and even though only two schools in Howard County have competitors in wheelchair racing, defendants will count all of Howard County's 12 secondary schools toward the 40% minimum needed to elevate wheelchair racing to an event for which team points are awarded.
In sum, it is not likely that, upon a full review of the merits of McFadden's claims, the court will be pursuaded that it is discriminatory under the disability rights statutes for defendants to maintain a difference in the opportunity of wheelchair racers, in contrast to non-wheelchair racers, to earn points for teams, where all but a small number of teams are significantly under-represented in the distinct class of competitors of which McFadden is the sole member: wheelers. Accordingly, McFadden's request for preliminary injunction does not satisfy the long-standing criteria applicable to such efforts and the motion is denied.
The full opinion is available in PDF.
Sunday, May 6, 2007
In the Matter of R.M.W. (U.S.D.C.)(Approved for Publication)
Signed May 1, 2007--Opinion by Judges Peter J. Messitte, Benson E. Legg, and Andre M. Davis. Approved for publication.
R.M.W., a former member of the Bar of the U.S. District Court for the District of Maryland, was convicted of several felonies and as a result lost his bar membership. He petitioned for readmission to membership. Previously in this case, the U.S. District Court, en banc, had ruled that the standards applicable to the evaluation of application for membership in the Bar by individuals convicted of felonies should also apply to applications for readmission.
The case involving admissions to the Bar, In the Matter of S.G.P., 428 F.Supp. 2d 389 (D. Md. 2006) overruled In the Matter of G.L.S., 586 F.Supp. 375 (D. Md. 1984), and established new criteria for the evaluation of applications and reapplications for membership in the Bar by individuals convicted of felonies.
The factors to be considered are as follows:
1. The nature and character of the offense or offenses committed;
2. The number and duration of offenses and the sentence as to each;
3. The period of any probation or supervised release term and whether the petitioner's adjustment to same was satisfactory;
4. The age and maturity of the applicant when the offenses were committed;
5. The grant or denial of a pardon for any offenses committed;
6. Whether the petitioner was disbarred by any other court;
7. The number of years that have elapsed since the last offense was committed, and the presence or absence of misconduct during that period;
8. Whether the petitioner has complied in all respects with the terms and conditions of prior disciplinary or remedial orders, including the payment of any costs ordered by the disbarring court;
9. Whether the petitioner has engaged or attempted or offered to engage in the unauthorized practice of law;
10. With regard to any incapacity or infirmity (including alcohol or drug abuse), whether it has ceased to exist and is not reasonably likely to recur in the future;
11. Whether the petitioner recognizes the wrongfulness and seriousness of the professional misconduct for which discipline was imposed;
12. Whether the petitioner currently has the requisite honesty and integrity to practice law;
13. The opinions of character witnesses about the applicant's moral fitness;
14. Whether the petitioner has kept informed about recent developments in the law and is competent to practice law;
15. Any other re-admissions to the bar since the petitioner's disbarment;
16. Any other matter that the petitioner may deem relevant to the application or that may be specifically requested by the Court.
R.M.W. began to practice law in his home town, Frederick, Maryland, immediately after graduating law school and passing the bar in 1975. Having used marijuana and other drugs as early as his high school days, by the late 1970's he had become addicted to cocaine and alcohol. In his law practice, much of which involved representation of clients charged with drinking and driving offenses and family matters, he was often paid in cash which he intentionally failed to report as income. This unreported income was used to purchase cocaine for his own consumption such that, during the period of time before his arrest, he was spending between $30,000 and $40,000 a year on his drug habit.
In September 1982, a search warrant was executed on Respondent's residence, which ultimately led to felony convictions both in Maryland state courts (state tax offenses) and federal court (drug offenses) and his disbarment from membership in the Maryland U.S.D.C. He spent a little more than nine months in various federal and Maryland detention facilities.
R.M.W. was suspended from the practice of law by the Maryland Court of Appeals in April 1985 and disbarred on June 4, 1987. He was disbarred by the Maryland U.S.D.C. on July 10, 1984.
R.M.W. was reinstated to the Maryland Bar by Order dated January 7, 2000 signed by Chief Judge Bell for the Maryland Court of Appeals, "with a majority of the Court concurring." He was returned to the Registry of Attorneys on February 3, 2000. Since that time he has satisfied the conditions set forth in that Order in every respect.
The opinion relates in detail the story of R.M.W.'s rehabilitation. As noted in the opinion, the report of the special investigator appointed by the court found that "One Judge [in Frederick County] described Respondent as 'a poster child' for rehabilitation. All the Judges [in Frederick County] enthusiastically support [his] current petition for reinstatement."
In concluding, the panel said as follows:
R.M.W., a former member of the Bar of the U.S. District Court for the District of Maryland, was convicted of several felonies and as a result lost his bar membership. He petitioned for readmission to membership. Previously in this case, the U.S. District Court, en banc, had ruled that the standards applicable to the evaluation of application for membership in the Bar by individuals convicted of felonies should also apply to applications for readmission.
The case involving admissions to the Bar, In the Matter of S.G.P., 428 F.Supp. 2d 389 (D. Md. 2006) overruled In the Matter of G.L.S., 586 F.Supp. 375 (D. Md. 1984), and established new criteria for the evaluation of applications and reapplications for membership in the Bar by individuals convicted of felonies.
The factors to be considered are as follows:
1. The nature and character of the offense or offenses committed;
2. The number and duration of offenses and the sentence as to each;
3. The period of any probation or supervised release term and whether the petitioner's adjustment to same was satisfactory;
4. The age and maturity of the applicant when the offenses were committed;
5. The grant or denial of a pardon for any offenses committed;
6. Whether the petitioner was disbarred by any other court;
7. The number of years that have elapsed since the last offense was committed, and the presence or absence of misconduct during that period;
8. Whether the petitioner has complied in all respects with the terms and conditions of prior disciplinary or remedial orders, including the payment of any costs ordered by the disbarring court;
9. Whether the petitioner has engaged or attempted or offered to engage in the unauthorized practice of law;
10. With regard to any incapacity or infirmity (including alcohol or drug abuse), whether it has ceased to exist and is not reasonably likely to recur in the future;
11. Whether the petitioner recognizes the wrongfulness and seriousness of the professional misconduct for which discipline was imposed;
12. Whether the petitioner currently has the requisite honesty and integrity to practice law;
13. The opinions of character witnesses about the applicant's moral fitness;
14. Whether the petitioner has kept informed about recent developments in the law and is competent to practice law;
15. Any other re-admissions to the bar since the petitioner's disbarment;
16. Any other matter that the petitioner may deem relevant to the application or that may be specifically requested by the Court.
R.M.W. began to practice law in his home town, Frederick, Maryland, immediately after graduating law school and passing the bar in 1975. Having used marijuana and other drugs as early as his high school days, by the late 1970's he had become addicted to cocaine and alcohol. In his law practice, much of which involved representation of clients charged with drinking and driving offenses and family matters, he was often paid in cash which he intentionally failed to report as income. This unreported income was used to purchase cocaine for his own consumption such that, during the period of time before his arrest, he was spending between $30,000 and $40,000 a year on his drug habit.
In September 1982, a search warrant was executed on Respondent's residence, which ultimately led to felony convictions both in Maryland state courts (state tax offenses) and federal court (drug offenses) and his disbarment from membership in the Maryland U.S.D.C. He spent a little more than nine months in various federal and Maryland detention facilities.
R.M.W. was suspended from the practice of law by the Maryland Court of Appeals in April 1985 and disbarred on June 4, 1987. He was disbarred by the Maryland U.S.D.C. on July 10, 1984.
R.M.W. was reinstated to the Maryland Bar by Order dated January 7, 2000 signed by Chief Judge Bell for the Maryland Court of Appeals, "with a majority of the Court concurring." He was returned to the Registry of Attorneys on February 3, 2000. Since that time he has satisfied the conditions set forth in that Order in every respect.
The opinion relates in detail the story of R.M.W.'s rehabilitation. As noted in the opinion, the report of the special investigator appointed by the court found that "One Judge [in Frederick County] described Respondent as 'a poster child' for rehabilitation. All the Judges [in Frederick County] enthusiastically support [his] current petition for reinstatement."
In concluding, the panel said as follows:
This Court believes that dishonesty involved in evading income taxes and in not filing tax returns has always been a serious matter. Drug activity today has become a matter of prime concern in the criminal justice system. Indeed, were [R.M.W.'s] cases to have come before a federal court in 2007, it is clear that the punishment to be imposed would be considerably more severe than that which was imposed by the state and federal judges in the mid-1980's.
But whatever the courts of some jurisdictions may believe about the permanent disqualification to serve as an attorney of an individual who has been convicted of a crime of dishonesty, this Court, joining the majority of courts, takes a different view. The Court believes that, when sufficient time has passed since the criminal activity, when there is manifest indication of the individual’s rehabilitation and remorse as well as his skill to serve as an attorney, when all that is presented to the Court in a clear and convincing matter, there is still room for someone to rejoin (or indeed to join in the first instance) the ranks of the Bar of this Court.
Accordingly, the Court concludes that [R.M.W.'s] rehabilitation is genuine and that he does indeed represent a benchmark for attorneys similarly situated who would seek reinstatement in our Bar.
A copy of the opinion is available in PDF as is a copy of the order. Note: As of this posting, the link provided here is correct, while the link to the opinion on the Court's website is not.
Update: A memorandum in this case by the special investigator appointed by the Court as to the issue of whether there is criminal conduct so serious or heinous to preclude reinstatement has been posted here.The Court ordered that the memorandum be attached to the opinion and recommended it for publication because "the memorandum is extraordinarily thorough in its exposition of a very important issue not well illuminated by the case law which would almost certainly prove useful to other courts facing the issue."
Saturday, May 5, 2007
Hagen v. U.S. (Maryland U.S.D.C.) (Approved for Publication)
Signed April 30, 2007--Memorandum Opinion by Judge Andre M. Davis.
Hagen filed this tax refund action after paying a portion of the amount allegedly due under a trust fund recovery penalty for unpaid payroll withholding taxes. The government counterclaimed for a total of $274,918 in unpaid assessments, penalties and interest for the fourth quarter of 1999 and the third quarter of 2000. Pending are the parties' cross-motions for summary judgment.
Subsequent to Hagen becoming CEO/Board Chairman in 1998 of American Quantum Cycles ("Quantum"), he was alerted that the company had not paid payroll withholding taxes. After achieving compliance, Quantum again lapsed into delinquency. This time, however, Hagen was unable to raise sufficient capital to pay the obligation and was forced to seek a merger with another motorcycle company, which merger ultimately failed. Hagen then left the company in October 2000.
Hagen asserts that certain portions of his former partner's ("Irving") testimony are inadmissible for lack of personal knowledge and, thus, cannot be used as a basis for determining whether summary judgment is warranted. Irving admitted that he had no personal knowledge of whether Hagen signed signature cards for bank accounts and that he lacked personal knowledge that Condon, Quantum's Financial Director, was instructed not to pay employment taxes. As such, the Court found Irving's testimony on these issues could not be considered in any examination of the pending motions.
The remaining portions of Irving's testimony were clearly admissible. Irving did have personal knowledge that Hagen was CEO and the duties Hagen's position entailed, including his power to "periodically dive anywhere and say do it this way." Further, Irving testified that Hagen was regularly briefed on all aspects of Quantum, including the finances, e.g., raising money, banking relationships and "tax things." In short, the testimony that related to the corporate structure or everyday governance of the company was clearly admissible.
Condon's testimony regarding whether Hagen ever signed any Quantum checks was inadmissible because it was related to written instruments not produced by either party. Pursuant to Fed. R. Evid. 1002, to prove the content of a writing, recording, or photograph (i.e., Hagen's signature on checks) required the original writing, recording or photograph. Nevertheless, Condon's testimony regarding Hagen's authority to sign Quantum checks was admissible.
The relevant statute, 26 U.S.C. § 6672(a) provides:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who wilfully fails to collect such tax, or truthfully account for and pay over such tax, or wilfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
Courts have uniformly interpreted this provision to mean that a person can be liable under Section 6672(a) only if (1) he is a "responsible person" under a duty to collect, account for, and pay over trust fund taxes, and (2) he wilfully fails to discharge his duties as a responsible person. A party is not presumed to be a responsible person merely because of his title. The Fourth Circuit has stated that, in determining responsibility under § 6672, the "crucial inquiry [is] whether the person had the effective power to pay taxes -- that is, whether he had the actual authority or ability, in view of his status within the corporation, to pay the taxes owed." Further, § 6672 applies to all responsible persons and not just the most responsible person.
Hagen was Quantum's CEO and Board Chairman and directed what bills to pay and how to pay them. Hagen, himself, admitted that he gave instructions as to how payroll and other expenses should be handled after the taxes for the first quarter of 1999 were not paid. "[A] person has significant control if he has the final or significant word over which bills or creditors get paid." Quattrone Accounts, Inc., v. U.S. Although Hagen never physically signed the checks, he had the power, as Quantum's CEO, to order which checks to issue.
In further consideration, liability arises only from a "wilfull" violation. The Fourth Circuit has stated that "wilfullness," as defined by § 6672, means actual or constructive knowledge that taxes were unpaid. Specifically, the "failure to pay trust fund taxes cannot be wilfull unless there is either 'knowledge of nonpayment or reckless disregard of whether the payments were being made.'" One way in which wilfullness may be established is to show that the responsible person made a "voluntary, conscious and intentional decision to prefer other creditors over the government." Even assuming Hagen may not have known about the second wave of tax deficiencies until late July/early August, his own testimony disclosed that he learned of the tax deficiencies prior to instructing Condon as to which bills were to be paid and in what order -- none of which included the United States.
Because Hagen is a responsible person under § 6672 and he wilfully failed to pay withheld taxes to the IRS, the motion of the United States for summary judgment was granted and Hagen's motion denied.
The Full Opinion is Available in PDF.
Hagen filed this tax refund action after paying a portion of the amount allegedly due under a trust fund recovery penalty for unpaid payroll withholding taxes. The government counterclaimed for a total of $274,918 in unpaid assessments, penalties and interest for the fourth quarter of 1999 and the third quarter of 2000. Pending are the parties' cross-motions for summary judgment.
Subsequent to Hagen becoming CEO/Board Chairman in 1998 of American Quantum Cycles ("Quantum"), he was alerted that the company had not paid payroll withholding taxes. After achieving compliance, Quantum again lapsed into delinquency. This time, however, Hagen was unable to raise sufficient capital to pay the obligation and was forced to seek a merger with another motorcycle company, which merger ultimately failed. Hagen then left the company in October 2000.
Hagen asserts that certain portions of his former partner's ("Irving") testimony are inadmissible for lack of personal knowledge and, thus, cannot be used as a basis for determining whether summary judgment is warranted. Irving admitted that he had no personal knowledge of whether Hagen signed signature cards for bank accounts and that he lacked personal knowledge that Condon, Quantum's Financial Director, was instructed not to pay employment taxes. As such, the Court found Irving's testimony on these issues could not be considered in any examination of the pending motions.
The remaining portions of Irving's testimony were clearly admissible. Irving did have personal knowledge that Hagen was CEO and the duties Hagen's position entailed, including his power to "periodically dive anywhere and say do it this way." Further, Irving testified that Hagen was regularly briefed on all aspects of Quantum, including the finances, e.g., raising money, banking relationships and "tax things." In short, the testimony that related to the corporate structure or everyday governance of the company was clearly admissible.
Condon's testimony regarding whether Hagen ever signed any Quantum checks was inadmissible because it was related to written instruments not produced by either party. Pursuant to Fed. R. Evid. 1002, to prove the content of a writing, recording, or photograph (i.e., Hagen's signature on checks) required the original writing, recording or photograph. Nevertheless, Condon's testimony regarding Hagen's authority to sign Quantum checks was admissible.
The relevant statute, 26 U.S.C. § 6672(a) provides:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who wilfully fails to collect such tax, or truthfully account for and pay over such tax, or wilfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
Courts have uniformly interpreted this provision to mean that a person can be liable under Section 6672(a) only if (1) he is a "responsible person" under a duty to collect, account for, and pay over trust fund taxes, and (2) he wilfully fails to discharge his duties as a responsible person. A party is not presumed to be a responsible person merely because of his title. The Fourth Circuit has stated that, in determining responsibility under § 6672, the "crucial inquiry [is] whether the person had the effective power to pay taxes -- that is, whether he had the actual authority or ability, in view of his status within the corporation, to pay the taxes owed." Further, § 6672 applies to all responsible persons and not just the most responsible person.
Hagen was Quantum's CEO and Board Chairman and directed what bills to pay and how to pay them. Hagen, himself, admitted that he gave instructions as to how payroll and other expenses should be handled after the taxes for the first quarter of 1999 were not paid. "[A] person has significant control if he has the final or significant word over which bills or creditors get paid." Quattrone Accounts, Inc., v. U.S. Although Hagen never physically signed the checks, he had the power, as Quantum's CEO, to order which checks to issue.
In further consideration, liability arises only from a "wilfull" violation. The Fourth Circuit has stated that "wilfullness," as defined by § 6672, means actual or constructive knowledge that taxes were unpaid. Specifically, the "failure to pay trust fund taxes cannot be wilfull unless there is either 'knowledge of nonpayment or reckless disregard of whether the payments were being made.'" One way in which wilfullness may be established is to show that the responsible person made a "voluntary, conscious and intentional decision to prefer other creditors over the government." Even assuming Hagen may not have known about the second wave of tax deficiencies until late July/early August, his own testimony disclosed that he learned of the tax deficiencies prior to instructing Condon as to which bills were to be paid and in what order -- none of which included the United States.
Because Hagen is a responsible person under § 6672 and he wilfully failed to pay withheld taxes to the IRS, the motion of the United States for summary judgment was granted and Hagen's motion denied.
The Full Opinion is Available in PDF.
Friday, May 4, 2007
The Equal Rights Center v. Equity Residential, et al. (Maryland U.S.D.C) (Approved for Publication)
Signed April 13, 2007--Memorandum Opinion by Judge Andre M. Davis.
The Equal Rights Center ("ERC") is a Washington, D.C.-based non-profit organization having approximately 150 individual members, many with disabilities. ERC's mission, inter alia, is to protect the rights of persons with disabilities through education, counseling, advocacy, enforcement, and referral services. ERC instituted this action for injunctive and declaratory relief, and damages, against Equity Residential, a real estate investment trust organized under the laws of Maryland (which describes itself as one of the largest owners [of apartment buildings] in the U.S.) and ERC Operating Limited Partnership, an Illinois limited partnership owned and controlled by Equity Residential (collectively, "Equity").
The first claim by ERC falls under the Fair Housing Act ("FHA"). The gravamen of this claim is that Equity engaged in a pattern and practice of violating the FHA in that they repeatedly and continually failed to design and construct properties subject to prescriptions of the FHA, i.e., multi-family properties containing the minimum number of units and relevant features so as to render the properties accessible to persons with disabilities. The second claim sues under the Americans with Disabilities Act ("ADA"), contending that the properties at issue do not contain, in areas comprising "public accommodations," e.g., leasing offices, parking lots, sidewalks, and restrooms, certain features of minimum accessibility and adaptable design as required by law.
Equity responded with a Rule 12(b)(6) motion to dismiss for lack of subject matter jurisdiction and for improper venue. Equity sought, in the alternative, a severance of what they asserted were multiple claims and a transfer of venue of such severed claims to the numerous districts where the challegened properties are located. Reasoning that the purpose of Rule 12(b)(6) is to test a sufficiency of a complaint and not to resolve contests regarding facts, the merits of a claim, or the applicability of defenses, the Court denied Equity's motion.
A Rule 12(b)(6) motion should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitled plaintiff to relief, viewed in the light most favorable to the plaintiff. The Court's first consideration was standing. To establish Article III standing, a plaintiff must allege facts which demonstrate: (1) the existence of a "concrete and particularized" injury-in-fact; (2) a causal connection between the injury suffered and the conduct complained of; and (3) that a favorable adjudication would redress the alleged injury. Fundamentally, it is a pleading burden, although the court must be satisfied at all times that the requirement is met. Organizational standing under the FHA exists to the limits of constitutional "case or controversy" limits; prudential considerations play no role. Thus, to allege a redressable injury-in-fact caused by Equity under the FHA, ERC need only allege facts that demonstrate that the Equity's actions either have caused the organization to divert resources to identify and counteract the defendants' unlawful practices or that the challenged actions have frustrated ERC's mission, which allegation ERC made.
Nonetheless, Equity challenged standing, relying on the contentions that (1) ERC's mission is too generalized for ERC to suffer a cognizable injury; (2) as a matter of law, ERC does not and cannot suffer a cognizable injury outside of the greater Washington area; and (3) ERC will not be entitled to relief on a nationwide basis. The Court found all three contentions unpursuasive.
Finally, Equity sought to have the court slice and dice ERC's two legal claims into 300 separate claims (one for each property) and, thereafter, transfer each claim to the federal district in which that property is located. The Court found to do so would not only be inappropriate but would unnecessarily create a litigation nightmare. Courts have recognized a presumption in favor of the nonmoving party that all claims in a case will be resolved in a single trial and not be severed, placing the burden on the party moving for severance to show that: (1) it will be severely prejudiced without a separate trial; and (2) the issue to be severed is so distinct and separable from the others that a trial of that issue alone may proceed without injustice. In determining whether severance is proper, courts consider: (1) whether the issues sought to be tried separately are significantly different from one another; (2) whether the separable issues require different witnesses and different documentary proof; (3) whether the party opposing severance will be prejudiced if it is granted; and (4) whether the party requesting severance will be prejudiced if the claims are not severed.
As the circumstances in the instant case weighed heavily against severance and transfer, Equity's motion was denied.
The full opinion is available in PDF.
The Equal Rights Center ("ERC") is a Washington, D.C.-based non-profit organization having approximately 150 individual members, many with disabilities. ERC's mission, inter alia, is to protect the rights of persons with disabilities through education, counseling, advocacy, enforcement, and referral services. ERC instituted this action for injunctive and declaratory relief, and damages, against Equity Residential, a real estate investment trust organized under the laws of Maryland (which describes itself as one of the largest owners [of apartment buildings] in the U.S.) and ERC Operating Limited Partnership, an Illinois limited partnership owned and controlled by Equity Residential (collectively, "Equity").
The first claim by ERC falls under the Fair Housing Act ("FHA"). The gravamen of this claim is that Equity engaged in a pattern and practice of violating the FHA in that they repeatedly and continually failed to design and construct properties subject to prescriptions of the FHA, i.e., multi-family properties containing the minimum number of units and relevant features so as to render the properties accessible to persons with disabilities. The second claim sues under the Americans with Disabilities Act ("ADA"), contending that the properties at issue do not contain, in areas comprising "public accommodations," e.g., leasing offices, parking lots, sidewalks, and restrooms, certain features of minimum accessibility and adaptable design as required by law.
Equity responded with a Rule 12(b)(6) motion to dismiss for lack of subject matter jurisdiction and for improper venue. Equity sought, in the alternative, a severance of what they asserted were multiple claims and a transfer of venue of such severed claims to the numerous districts where the challegened properties are located. Reasoning that the purpose of Rule 12(b)(6) is to test a sufficiency of a complaint and not to resolve contests regarding facts, the merits of a claim, or the applicability of defenses, the Court denied Equity's motion.
A Rule 12(b)(6) motion should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitled plaintiff to relief, viewed in the light most favorable to the plaintiff. The Court's first consideration was standing. To establish Article III standing, a plaintiff must allege facts which demonstrate: (1) the existence of a "concrete and particularized" injury-in-fact; (2) a causal connection between the injury suffered and the conduct complained of; and (3) that a favorable adjudication would redress the alleged injury. Fundamentally, it is a pleading burden, although the court must be satisfied at all times that the requirement is met. Organizational standing under the FHA exists to the limits of constitutional "case or controversy" limits; prudential considerations play no role. Thus, to allege a redressable injury-in-fact caused by Equity under the FHA, ERC need only allege facts that demonstrate that the Equity's actions either have caused the organization to divert resources to identify and counteract the defendants' unlawful practices or that the challenged actions have frustrated ERC's mission, which allegation ERC made.
Nonetheless, Equity challenged standing, relying on the contentions that (1) ERC's mission is too generalized for ERC to suffer a cognizable injury; (2) as a matter of law, ERC does not and cannot suffer a cognizable injury outside of the greater Washington area; and (3) ERC will not be entitled to relief on a nationwide basis. The Court found all three contentions unpursuasive.
Finally, Equity sought to have the court slice and dice ERC's two legal claims into 300 separate claims (one for each property) and, thereafter, transfer each claim to the federal district in which that property is located. The Court found to do so would not only be inappropriate but would unnecessarily create a litigation nightmare. Courts have recognized a presumption in favor of the nonmoving party that all claims in a case will be resolved in a single trial and not be severed, placing the burden on the party moving for severance to show that: (1) it will be severely prejudiced without a separate trial; and (2) the issue to be severed is so distinct and separable from the others that a trial of that issue alone may proceed without injustice. In determining whether severance is proper, courts consider: (1) whether the issues sought to be tried separately are significantly different from one another; (2) whether the separable issues require different witnesses and different documentary proof; (3) whether the party opposing severance will be prejudiced if it is granted; and (4) whether the party requesting severance will be prejudiced if the claims are not severed.
As the circumstances in the instant case weighed heavily against severance and transfer, Equity's motion was denied.
The full opinion is available in PDF.
Wednesday, May 2, 2007
Gordon Grocery, Inc. v. Associated Wholesalers, Inc. (Maryland U.S.D.C.) (Not Approved for Publication)
Signed April 30, 2007--Memorandum opinion by Judge Andre M. Davis. (Not approved for publication.)
In a previous opinion (MCW synopsis here), the Court remanded the case to state court from which it had been removed. After remand, the plaintiff amended its complaint. In response, the defendant again attempted to remove the case to federal court.
The plaintiff had previously attempted to amend its claim in federal court to state the same additional claim that it set forth in the amended complaint filed in state court. The defendant had previously opposed this amendment in federal court and the defendant's opposition was sustained. However, because Maryland state rules are more liberal with respect to the allowance of amendments, the defendant lacked the ability to attack the amendment procedurally in the state court. Instead, it argued that the amendment constituted a "changed circumstance" allowing it to again seek removal to the federal court.
The Court again remanded the case to state court holding that: "Plainly, defendant will not be heard to contend under the circumstances here that plaintiff engaged in 'procedural fencing' to deprive it of a federal forum. . . or that it 'uncovered' some 'new ground of removal' after this case was remanded." (Citations omitted.)
The Court's opinion is available in PDF.
In a previous opinion (MCW synopsis here), the Court remanded the case to state court from which it had been removed. After remand, the plaintiff amended its complaint. In response, the defendant again attempted to remove the case to federal court.
The plaintiff had previously attempted to amend its claim in federal court to state the same additional claim that it set forth in the amended complaint filed in state court. The defendant had previously opposed this amendment in federal court and the defendant's opposition was sustained. However, because Maryland state rules are more liberal with respect to the allowance of amendments, the defendant lacked the ability to attack the amendment procedurally in the state court. Instead, it argued that the amendment constituted a "changed circumstance" allowing it to again seek removal to the federal court.
The Court again remanded the case to state court holding that: "Plainly, defendant will not be heard to contend under the circumstances here that plaintiff engaged in 'procedural fencing' to deprive it of a federal forum. . . or that it 'uncovered' some 'new ground of removal' after this case was remanded." (Citations omitted.)
The Court's opinion is available in PDF.
Tuesday, April 24, 2007
NaturaLawn of America, Inc. v. West Group, LLC (Maryland U.S.D.C.) (Approved for publication)
Filed April 22, 2007. Memorandum Opinion and Order by Judge Andre M. Davis (approved for publication).
Upon consideration of a motion by the plaintiff ("NaturaLawn") for a preliminary enjuction to enjoin the defendants ("West") from infringing NaturaLawn's trademark, disclosing or using NaturaLawn's trade secrets or competing against NaturaLawn, and West's motion to stay pending appeal, the judge GRANTED the requested preliminary injunction and DENIED the motion to stay.
(synopsis to follow)
The Memorandum Opinion and Order are available in PDF format.
Upon consideration of a motion by the plaintiff ("NaturaLawn") for a preliminary enjuction to enjoin the defendants ("West") from infringing NaturaLawn's trademark, disclosing or using NaturaLawn's trade secrets or competing against NaturaLawn, and West's motion to stay pending appeal, the judge GRANTED the requested preliminary injunction and DENIED the motion to stay.
(synopsis to follow)
The Memorandum Opinion and Order are available in PDF format.
Glaxo Group Ltd. v. Leavitt (Maryland U.S.D.C.) (Approved for publication)
Filed April 23, 2007. Order by Judge Andre M. Davis (approved for publication).
In a follow-up to an earlier opinion (discussed here on this blog), an intervenor in the case, Roxane Laboratories, Inc. ("Roxane"), filed a motion requesting the court to recall the earlier opinion and substitute a redacted version which would omit historical net profit information as being "proprietary" and "highly confidential". The court declined the request, noting that Roxane's request had come not only after the opinion was posted on the court's Web site, but also after a copy could be found on "a popular legal research website" [could it be . . .? ed.], and thus the request was too late. Moreover, the court is a "public institution doing the public's business", and the reasons for its judgments must be exposed for public scrutiny, so even a timely request would likely have been declined.
The Order is available in PDF format.
In a follow-up to an earlier opinion (discussed here on this blog), an intervenor in the case, Roxane Laboratories, Inc. ("Roxane"), filed a motion requesting the court to recall the earlier opinion and substitute a redacted version which would omit historical net profit information as being "proprietary" and "highly confidential". The court declined the request, noting that Roxane's request had come not only after the opinion was posted on the court's Web site, but also after a copy could be found on "a popular legal research website" [could it be . . .? ed.], and thus the request was too late. Moreover, the court is a "public institution doing the public's business", and the reasons for its judgments must be exposed for public scrutiny, so even a timely request would likely have been declined.
The Order is available in PDF format.
Saturday, April 7, 2007
Glaxo Group, Ltd. v. Leavitt (Maryland U.S.D.C.) Approved for Publication
Order Signed April 6, 2007--Judge Andre M. Davis. Approved for publication.
Plaintiff Glaxo Group, Ltd., sought and obtained a temporary restraining order (TRO), which was secured by a $3 million bond, enjoining the effectiveness of the approval by the Food and Drug Administration of an application by intervening defendant Roxane Laboratories, Inc. (Roxane), to market fluticasone propionate, the generic form of Glaxo's patented Flonase, the patent for which had expired. Subsequently, after a hearing, the Court denied Glaxo's motion for a preliminary injunction. Now pending is Roxane's motion for execution on the bond.
In this opinion and order, Judge Davis sets forth findings of fact and conclusions of law determining that Roxane has suffered damages from the TRO and should have execution against the bond.
The Court concluded that:
In a footnote, however, the Court denied Roxane full restitution damages, holding that:
Plaintiff Glaxo Group, Ltd., sought and obtained a temporary restraining order (TRO), which was secured by a $3 million bond, enjoining the effectiveness of the approval by the Food and Drug Administration of an application by intervening defendant Roxane Laboratories, Inc. (Roxane), to market fluticasone propionate, the generic form of Glaxo's patented Flonase, the patent for which had expired. Subsequently, after a hearing, the Court denied Glaxo's motion for a preliminary injunction. Now pending is Roxane's motion for execution on the bond.
In this opinion and order, Judge Davis sets forth findings of fact and conclusions of law determining that Roxane has suffered damages from the TRO and should have execution against the bond.
The Court concluded that:
The TRO prevented Roxane from marketing fluticasone for a total of 11 days, causing Roxane to lose profits that it would have otherwise realized. This harm is real and substantial for two reasons: (1) at the time of the TRO, Roxane's fluticasone products, which had already been shipped to the retailers, were prevented by the TRO from being sold to consumers; and (2) Roxane has established by the clear weight of the evidence an adequate, if modest, run rate for fluticasone sufficient to reasonably calculate lost profits.The Court found that Roxane would have had net profit of $14.80 per unit and that, in the 11 days that the TRO was in effect, it would have sold 223,272 units. It thus suffered $3,304,423.97 in lost profits as a consequence of the TRO, which is an amount in excess of the $3 Million bond. Accordingly, it awarded Roxane the entire bond amount.
In a footnote, however, the Court denied Roxane full restitution damages, holding that:
Roxane is not entitled to a restitutionary measure of recovery. Glaxo did not act wrongfully under the circumstances of this case; indeed, its prompt decision to withdraw its appeal from the denial of the preliminary injunction evidences its good faith. While it is true that Glaxo had sales that it would not have enjoyed during the pendency of the TRO had the TRO not been issued, its right to seek such relief was not exercised maliciously or unlawfully. As an intervening defendant, Roxane had the right to urge the court to require a bond that was reasonable under the circumstances and it did so.
The full opinion is available in PDF.
Sunday, April 1, 2007
Palm v. Wausau Benefits, Inc. (U.S.D.C. Maryland)(Not approved for publication)
Filed March 26, 2007—Opinion by Judge Andre Davis
Plaintiff Anthony Palm, a beneficiary under a group long term disability income policy sponsored by his former employer, sued under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et. seq., to challenge a denial of benefits.
The Court considered it undisputed that Palm suffered from numerous impairments, including chronic lumbalgia, acute chronic lumbosacral paravertebral muscle spasm, bilaterally, and degenerative dessication with dorsal disc bulging at L4 - 5, L5 - S1 and C5 - 6, that are, collectively, disabling. On the ultimate issue, however, of whether the evidence was sufficient to establish that Palm was "totally disabled" from working in "any occupation," the Court determined that a physician’s opinion that Palm cannot perform sedentary or light duty work was rather conclusory and wholly undercut by other evidence in the record, including surveillance videos of Palm engaged in physical activity inconsistent with his claims.
On cross-motions for summary judgment, the Court found that Palm failed to show by a preponderance of the evidence that he is "totally disabled" within the definition of the relevant policy. At best, the Court said, the evidence was in equipoise (and parenthetically added that it was not), but in any event Palm failed to satisfy his burden to show “total disability” under the Policy.
The opinion is available in PDF.
Plaintiff Anthony Palm, a beneficiary under a group long term disability income policy sponsored by his former employer, sued under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et. seq., to challenge a denial of benefits.
The Court considered it undisputed that Palm suffered from numerous impairments, including chronic lumbalgia, acute chronic lumbosacral paravertebral muscle spasm, bilaterally, and degenerative dessication with dorsal disc bulging at L4 - 5, L5 - S1 and C5 - 6, that are, collectively, disabling. On the ultimate issue, however, of whether the evidence was sufficient to establish that Palm was "totally disabled" from working in "any occupation," the Court determined that a physician’s opinion that Palm cannot perform sedentary or light duty work was rather conclusory and wholly undercut by other evidence in the record, including surveillance videos of Palm engaged in physical activity inconsistent with his claims.
On cross-motions for summary judgment, the Court found that Palm failed to show by a preponderance of the evidence that he is "totally disabled" within the definition of the relevant policy. At best, the Court said, the evidence was in equipoise (and parenthetically added that it was not), but in any event Palm failed to satisfy his burden to show “total disability” under the Policy.
The opinion is available in PDF.
Friday, March 16, 2007
Proa v. NRT Mid Atlantic, Inc. (Maryland U.S.D.C.)
Filed March 13, 2007. Memorandum opinion by Judge Andre M. Davis.
Plaintiffs, real estate agents in Maryland, allege principally that the defendants discriminated against them on the basis of race and religion. Defendants timely moved to dismiss the Title VII claims of one plaintiff for failure to exhaust administrative remedies and the ostensible declaratory judgment “class claim” asserted by both plaintiffs. The motion was fully briefed and no hearing was needed. For the reasons stated within, the motion shall be granted.
(synopsis to follow)
The memorandum opinion is available in PDF.
Plaintiffs, real estate agents in Maryland, allege principally that the defendants discriminated against them on the basis of race and religion. Defendants timely moved to dismiss the Title VII claims of one plaintiff for failure to exhaust administrative remedies and the ostensible declaratory judgment “class claim” asserted by both plaintiffs. The motion was fully briefed and no hearing was needed. For the reasons stated within, the motion shall be granted.
(synopsis to follow)
The memorandum opinion is available in PDF.
Thursday, March 1, 2007
Gordon Grocery, Inc. v. Associated Wholesalers, Inc. (Maryland U.S.D.C.) (Approved for Publication)
Signed February 28, 2007--Memorandum opinion by Judge Andre M. Davis. (Approved for publication.)
Held: Dispute over stock redemption procedures remanded back to state court on the basis of mootness.
Plaintiff Gordon Grocery, Inc. ("Gordon Grocery") is a shareholder in defendant Associated Wholesalers, Inc. ("Associated"), which is a Pennsylvania corporation operating as a cooperative engaged in the business of purchasing, manufacturing, processing, warehousing and distributing food and related merchandise for retail merchant shareholders such as plaintiff. In the fall of 2005, Associated notified Gordon Grocery that it had failed to satisfy the minimum purchase requirements of the cooperative, and that Associated would redeem Gordon Grocery's shares, thereby terminating their relationship. Associated proposed to do so in two installments, one-third initially, and two thirds in 2010, while Gordon Grocery asserted the right to immediate redemption, and filed in state court for a declaratory judgment to that effect. Associated had the case removed to federal court.
During discovery, Associated elected to rescind the redemption determination and retain Gordon Grocery as a shareholder, thus rendering the dispute over redemption procedures abstract, and moved for summary judgment on the ground of mootness. The judge agreed, but rather than rendering the requested "judgment" in favor of Associated, remanded the case to state court from which it had been removed, where the judge speculated (but declined to decide) that the state trial court might determine it lacks subject matter jurisdiction on the ground of mootness.
The memorandum opinion is available in PDF.
Held: Dispute over stock redemption procedures remanded back to state court on the basis of mootness.
Plaintiff Gordon Grocery, Inc. ("Gordon Grocery") is a shareholder in defendant Associated Wholesalers, Inc. ("Associated"), which is a Pennsylvania corporation operating as a cooperative engaged in the business of purchasing, manufacturing, processing, warehousing and distributing food and related merchandise for retail merchant shareholders such as plaintiff. In the fall of 2005, Associated notified Gordon Grocery that it had failed to satisfy the minimum purchase requirements of the cooperative, and that Associated would redeem Gordon Grocery's shares, thereby terminating their relationship. Associated proposed to do so in two installments, one-third initially, and two thirds in 2010, while Gordon Grocery asserted the right to immediate redemption, and filed in state court for a declaratory judgment to that effect. Associated had the case removed to federal court.
During discovery, Associated elected to rescind the redemption determination and retain Gordon Grocery as a shareholder, thus rendering the dispute over redemption procedures abstract, and moved for summary judgment on the ground of mootness. The judge agreed, but rather than rendering the requested "judgment" in favor of Associated, remanded the case to state court from which it had been removed, where the judge speculated (but declined to decide) that the state trial court might determine it lacks subject matter jurisdiction on the ground of mootness.
The memorandum opinion is available in PDF.
Wednesday, February 7, 2007
Bouie and Jones v. Rugged Wearhouse, Inc. (Maryland U.S.D.C.)
Memorandum and Order Issued February 5, 2007–Opinion by Judge Andre M. Davis
Bouie and Jones filed a 42 U.S.C. § 1981 racial discrimination and common law defamation claim from an accusation of attempted shoplifting while shopping in Rugged Wearhouse. Dismissal of the racial discrimination claim by the Circuit Court for Baltimore City left pending defendant's motion for summary judgment on the issue of damages for the state law claim. Without hearing, their motion was granted in part and denied in part.
The case deals with allegedly defamatory speech involving two private parties in a matter of a private concern. The plaintiffs claim that, after being followed by store employees, they attempted to leave without making a purchase at which time the store manager spoke harshly to Bouie, essentially accusing Bouie and Jones of stealing or attempting to steal items and threatening to call police if they returned.
In Maryland, the elements of defamation with regard to private figures are:
(1) that the defendant made a defamatory communication, i.e., that he communicated a statement tending to expose the plaintiff to public scorn, hatred, contempt, or ridicule to a third person who reasonably recognized the statement as being defamatory; (2) that the statement was false; (3) that the defendant was at fault in communicating the statement; and (4) that the plaintiff suffered harm.
Defendant conceded that plaintiffs generated genuine disputes of fact on the issue of liability but contended plaintiffs’ damages must be limited. The court agreed in part based on Maryland’s distinction between defamation per se and defamation per quod. Viewing the facts most favorably to the plaintiffs, the manager’s speech constituted defamatory communication and injury is presumed. However, the record was wholly bereft of any evidence that plaintiffs suffered actual harm. "Harm" is not limited to monetary loss; in fact, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation and mental anguish and suffering. Plaintiffs’ deposition testimony showed conclusively that neither suffered actual damages, either personal or business, from the store manager’s defamatory statements. Plaintiffs did not allege mental anguish as an element of damages, and there was nothing in the record to support an award of damages for any such harm.
As a matter of law, plaintiffs failed to generate a genuine dispute of material fact as to the existence of actual damages flowing from the defamatory statements made by the store manager. Therefore, as a matter of law, defendant is entitled to determination that any damages award shall be limited to "presumed damages" from the defamatory per se statements that plaintiffs were shoplifters. The issue of "actual malice," i.e., wether the store manager knew his allegations were false, thereby permitting an award of punitive damages, is for the jury. In a defamation action, punitive damages are not recoverable based on ill will, spite or an intent to injure; instead, to recover punitive damages, the plaintiff must establish that the defamatory falsehood was made with actual knowledge that it was false.
The full memorandum is available in PDF.
Bouie and Jones filed a 42 U.S.C. § 1981 racial discrimination and common law defamation claim from an accusation of attempted shoplifting while shopping in Rugged Wearhouse. Dismissal of the racial discrimination claim by the Circuit Court for Baltimore City left pending defendant's motion for summary judgment on the issue of damages for the state law claim. Without hearing, their motion was granted in part and denied in part.
The case deals with allegedly defamatory speech involving two private parties in a matter of a private concern. The plaintiffs claim that, after being followed by store employees, they attempted to leave without making a purchase at which time the store manager spoke harshly to Bouie, essentially accusing Bouie and Jones of stealing or attempting to steal items and threatening to call police if they returned.
In Maryland, the elements of defamation with regard to private figures are:
(1) that the defendant made a defamatory communication, i.e., that he communicated a statement tending to expose the plaintiff to public scorn, hatred, contempt, or ridicule to a third person who reasonably recognized the statement as being defamatory; (2) that the statement was false; (3) that the defendant was at fault in communicating the statement; and (4) that the plaintiff suffered harm.
Defendant conceded that plaintiffs generated genuine disputes of fact on the issue of liability but contended plaintiffs’ damages must be limited. The court agreed in part based on Maryland’s distinction between defamation per se and defamation per quod. Viewing the facts most favorably to the plaintiffs, the manager’s speech constituted defamatory communication and injury is presumed. However, the record was wholly bereft of any evidence that plaintiffs suffered actual harm. "Harm" is not limited to monetary loss; in fact, the more customary types of actual harm inflicted by defamatory falsehood include impairment of reputation and standing in the community, personal humiliation and mental anguish and suffering. Plaintiffs’ deposition testimony showed conclusively that neither suffered actual damages, either personal or business, from the store manager’s defamatory statements. Plaintiffs did not allege mental anguish as an element of damages, and there was nothing in the record to support an award of damages for any such harm.
As a matter of law, plaintiffs failed to generate a genuine dispute of material fact as to the existence of actual damages flowing from the defamatory statements made by the store manager. Therefore, as a matter of law, defendant is entitled to determination that any damages award shall be limited to "presumed damages" from the defamatory per se statements that plaintiffs were shoplifters. The issue of "actual malice," i.e., wether the store manager knew his allegations were false, thereby permitting an award of punitive damages, is for the jury. In a defamation action, punitive damages are not recoverable based on ill will, spite or an intent to injure; instead, to recover punitive damages, the plaintiff must establish that the defamatory falsehood was made with actual knowledge that it was false.
The full memorandum is available in PDF.
Tuesday, February 6, 2007
Andrew v. Clark (Maryland U.S.D.C.)(Approved for Publication)
Issued February 5, 2007 -- Opinion of Judge Andre M. Davis. Approved for publication.
Plaintiff served as a Major in the Baltimore City Police Department (BCPD) and was the Commanding Officer of the Eastern District of the BCPD at times relevant. After a barricade incident, Plaintiff prepared and distributed to his chain of command an "internal memorandum" criticizing the BCPD's handling of that incident. Receiving no response from his chain of command, Plaintiff released a copy of the internal memorandum to a Baltimore Sun reporter. Internal Affairs investigated the release and Plaintiff was subsequently fired.
Plaintiff filed and subsequently moved to amend a complaint in U.S. District Court alleging multiple state and federal counts against then Police Commissioner Kevin Clark and other parties. The complaint as amended alleged inter alia that Defendants' firing of Plaintiff:
1. violated the procedural due process requirements under the 14th Amendment of the Constitution and 14 U.S. Sec. 1983 of the United States Code, as amended, due to the defendants' failure to provide either:
a. an adjudicatory hearing; or
b. a demotion to a civil service position at which a hearing would ostensibly apply under the Maryland Law Enforcement Officer's Bill of Rights ("LEOBR"); and further
2. violated Plaintiff's right to freedom of speech with respect to the preparation and release of the internal memorandum.
Defendants moved under Rule 12(b)(6) to dismiss all federal counts from the complaint.
The U.S. District Court held that Plaintiff acted in his capacity as a agent of the BCPD in preparing and distributing the internal memorandum, and accordingly had no such protected freedom of speech rights in that professional capacity under the First Amendment as would trump the BCPD's power to discipline or fire an employee. It held further that Defendant had not violated any of Plaintiff's procedural due process rights, as Plaintiff had no "property' right in his as an at-will employee under Maryland law, and thus no federal constitutional provision protected him from the deprivation of that "property". The Court also held that while state law may entertain a right of Plaintiff to be demoted to a protected, civil service rank as an intermediate discipline in lieu of termination, no constitutional principles commanded such a right.
Accordingly, the U.S District Court dismissed under Rule 12(b)(6) all federal claims in the complaint with prejudice and all non-diversity of citizenship state law claims without prejudice.
The Memorandum Opinion may be read here in PDF.
Plaintiff served as a Major in the Baltimore City Police Department (BCPD) and was the Commanding Officer of the Eastern District of the BCPD at times relevant. After a barricade incident, Plaintiff prepared and distributed to his chain of command an "internal memorandum" criticizing the BCPD's handling of that incident. Receiving no response from his chain of command, Plaintiff released a copy of the internal memorandum to a Baltimore Sun reporter. Internal Affairs investigated the release and Plaintiff was subsequently fired.
Plaintiff filed and subsequently moved to amend a complaint in U.S. District Court alleging multiple state and federal counts against then Police Commissioner Kevin Clark and other parties. The complaint as amended alleged inter alia that Defendants' firing of Plaintiff:
1. violated the procedural due process requirements under the 14th Amendment of the Constitution and 14 U.S. Sec. 1983 of the United States Code, as amended, due to the defendants' failure to provide either:
a. an adjudicatory hearing; or
b. a demotion to a civil service position at which a hearing would ostensibly apply under the Maryland Law Enforcement Officer's Bill of Rights ("LEOBR"); and further
2. violated Plaintiff's right to freedom of speech with respect to the preparation and release of the internal memorandum.
Defendants moved under Rule 12(b)(6) to dismiss all federal counts from the complaint.
The U.S. District Court held that Plaintiff acted in his capacity as a agent of the BCPD in preparing and distributing the internal memorandum, and accordingly had no such protected freedom of speech rights in that professional capacity under the First Amendment as would trump the BCPD's power to discipline or fire an employee. It held further that Defendant had not violated any of Plaintiff's procedural due process rights, as Plaintiff had no "property' right in his as an at-will employee under Maryland law, and thus no federal constitutional provision protected him from the deprivation of that "property". The Court also held that while state law may entertain a right of Plaintiff to be demoted to a protected, civil service rank as an intermediate discipline in lieu of termination, no constitutional principles commanded such a right.
Accordingly, the U.S District Court dismissed under Rule 12(b)(6) all federal claims in the complaint with prejudice and all non-diversity of citizenship state law claims without prejudice.
The Memorandum Opinion may be read here in PDF.
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